ADDRESSING AMBASSADOR EMMANUEL MWAMBA’S CONCERNS WITH IMF AND WORLD BANK CONCESSIONAL LOANS
By Alexander Nkosi
Ambassador Emmanuel Mwamba contends that Zambia has had several IMF Programmes since 1965 and they have all failed. He goes on to say that Zambia has just borrowed USD600 million from the World Bank and is expected to receive a bail-out loan of USD1.4 billion from the IMF. He concludes that this is like reinventing the wheel.
My response is that: At the end of 2021 Zambia’s external debt was USD12.9 billion, domestic debt was K189.7 billion and domestic arrears were K46.9 billion. With a domestic revenue of K98.9 billion, we cannot do without borrowing. However, we cannot continue with commercial loans, which carry high interest rates and short period of repayment. This is basically the reason we are chocked by debt.
A simple illustration of this is: Mr. Mulenga borrowed K100,000 for business at 2% interest rate to be repaid in 10 years, he did not succeed with his business. If he has no option but to borrow again, would you advise that he goes to the same firm that will charge 2% over 10 years or he borrows from another firm that will charge 50% to be repaid in 6 months? He did not fail because he borrowed from a firm that had flexible conditions but because of the way he used the borrowed money and the business he invetsed in.
The ideal situation for Zambia is to go for concessional loans that carry low interest rates and are repaid over a long period of time. This will reduce annual debt service outlays. We are negotiating debt restructuring because of huge annual debt service outlays that leave us with less money for economic and social sector spending. Out of a domestic revenue of K98.9 billion, K78.6 billion goes to debt service.