Parley committee expresses concern over lack of serious debt management interventions
By Staff Reporter
THE parliamentary Budget Committee says it is extremely concerned that there have been no quick efforts by the government to dismantle Zambia’s “mounting debt.”
On June 14, finance minister Margaret Mwanakatwe, in a press statement, announced that President Edgar Lungu had ordered cancellation of some existing loans, banned the issuance of letters of credit and guarantees to State-owned enterprises, terminated financing of development projects that are below 80 per cent completion and cut down on ministerial travels with immediate effect.
Mwanakatwe also stressed that nobody but her was mandated by law to sign any form of loan agreement on behalf of Zambia and further banned all government officials from making public statements on economic matters and debt contraction, going forward.
The minister further stated that upon completion of the debt sustainability analysis (DSA) and a full reconciliation of Zambia’s debt stock, the exercise confirmed that: “We need to undertake measures to bring debt risk to moderate from the current high risk.”
“Total public external debt as at end of March 2018 amounted to US$9.3 billion from US$8.7 billion in 2017. The domestic debt stock (government securities) amounted to K53.5 billion from K48.4 billion over the same period. Let me again, emphasise that we have reconciled all the debt with all our creditors and hereby confirm the debt position,” stated Mwanakatwe.
Debating the motion of whether or not the House should adopt the report of the budget committee for the second session of the 12th National Assembly laid on the table of the House on June 11, 2018 in Parliament on Tuesday evening, Mbala PF member of parliament Mwalimu Simfukwe said in line with its terms of reference as set out in the Standing Orders, the Budget Committee undertook a study of two issues of national importance – domestic resource mobilisation and the national budget and growing inequality in Zambia.
“Sir, your Committee’s findings are highlighted in your Committee’s report. It is my sincere hope that Honourable members of parliament have taken time to read the report. I will therefore only highlight some of the pertinent issues arising from the study,” Simfukwe, who is the Committee’s chairperson, told the House.
“In order for this Honourable House to appreciate why your Committee undertook this study, I will address some of the issues why it is imperative for Zambia to upscale mobilisation of domestic resources.”
Simfukwe noted that increased domestic resource mobilisation was a powerful tool for achieving the country’s developmental agenda.
“It strengthens the government’s ability to provide social public goods and alleviate poverty. In addition, it allows for increased policy space and greater policy ownership, leading to a better matching of capital investment and development strategies to domestic needs,” he said, adding that if efficiently managed, domestic resource mobilisation could potentially be the biggest source of long-term financing for sustainable development.
“Resources raised domestically are not tied to the stringent conditionalities associated with external financing and therefore the country is not exposed to the volatility or unpredictability that is sometimes associated with external funding. However, in spite of the recognition of the pivotal role of domestic resource mobilisation, the country continues to face a whole range of challenges in improving its domestic revenue performance.”
He also pointed out that the country’s tax base comprised a few people in the formal sector who bore the tax burden.
“The informal sector continues to grow and remains largely untaxed. Unfortunately, foreign investors have been given incentives that are unfavourable to the country’s revenue mobilisation efforts, further increasing the tax burden on the few tax-paying individuals and hampering domestic resource mobilisations efforts. Sir, it is disheartening that in spite of the realisation that the country’s resources are limited and have to be prudently shared among many competing national needs, one of the largest challenges is the national debt,” Simfukwe noted.
“Your Committee is extremely concerned that not enough is being done to … in the country’s mounting debt. While noting the development of the debt management strategy, your Committee observes that progress towards dismantling the country’s mounting debt has been very slow. On the contrary, there continues to be excessive government spending and further efforts to reduce government expenditure are not immediately evident to your Committee. As I have already stated, the tax burden in our country is borne by a very small segment of the population and it is the government’s responsibility to ensure that pronouncements on fiscal consolidation measures take root in the nation.”
And Simfukwe, whose motion was seconded by Moomba UPND member of parliament Fred Chaatila, lamented the delay by the executive to take to Parliament legislation that would enhance fiscal discipline vis-à-vis the loans and guarantees authorisation Act and also the planning and budgeting bill.
“The government has repeatedly stated that it is prioritising the implementation of public finance management reforms through enacting appropriate legislation. However, only one of the three promised pieces of legislation, that is the public finance management Act No. 1 of 2018, has been enacted. Your Committee therefore earnestly implores the government to inform the nation through this Honourable House what the status is of the revision of the loans and guarantees authorisation Act Chapter 366 of the Laws of Zambia and also the status of the planning and budgeting bill as envisaged in the Republican Constitution,” said Simfukwe.
