The Pros and Cons of the Debt Swap – Nevers Mumba

Sometimes it is difficult for any government to balance the demands of the capitalist philosophy that Government should have no business in doing business in the one hand, and it’s responsibility to stop at nothing to find solutions to the many problems it’s people face, on the other. The Issue of the debt Swap is one such issue. As the MMD, here is how we wish to break it down:

1. Banks and Microfinance Institutions have for a long time neglected the SME and small sole traders opting to MOSTLY lend to Civil servants, Local Corporates and Large Corporates. Currently, reports suggest that total amount of money owed to Various Bank and Non-Bank Financial Institutions by Civil Servants in loans and advances is well in excess of K6 Billion. It is also well known that the government has been struggling to finance their Special Purpose Vehicle for lending to civil servants , the Public Service Micro Finance Company Limited (PSMFC) and it’s assets currently sit at a paltry K500 Million. In addition, the Government not been remitting the monthly Installments even when they have collected the funds from the civil servants through PEMC. Our question is, where will the government suddenly obtain the necessary funds to pay off the Financial Institutions their K6 Billion if they are failing to pay the monthly installments?
2. On the bright side, The Debt Swap applied by the PF should be a lesson to the Banks and MFIs to become creative and broaden the range of loan products that can be extended to the real drivers of economic growth, which are the local business houses. The debt swap may, therefore, result in an increase in the availability of loans and other credit products to the suppliers, contractors and other business houses.
3. On the negative side, and this is for the Civil Servants, the idea of three months without deductions and a reduced refinancing interest option may be exciting now, but remember that this move alone may injure the confidence that private Lenders may have in lending to civil servants IN FUTURE because the lenders will fear that government may just suddenly come in and interfere with loan agreements that are already agreed, aimed and disbursed. This is especially true IF the government will delay in remitting the Loan Offset Figures, but implement the debt swap immediately on the side of the civil servants, as this government has repeatedly been doing with the deducted, but unremitted loan installments between the civil servants and the lending institutions.
   4.Meanwhile, the Bank Of Zambia must also disclose to the public how much Tax Payers Money has been given to these Financial Institutions by the BoZ as part of the K10 Million “Targeted Medium Term Refinancing Facility” (TMTRF) that was created last year to bolster Banks and Financial Institutions as part of the COVID-19 Stimulus Package. It might be necessary to also apply ANOTHER DEBT SWAP between GRZ through the Central Bank and the Financial Institutions that have borrowed from BoZ through this facility and the amounts be netted off.

As the MMD, our view is that this debt swap, apart from the unintended result that Banks will be forced to look for innovative credit products away from the conservative Civil Service Loan Book, is really just a political gimmick by the PF to appease the Civil Service and try and land them Votes in the elections. If this government has enough money to make an unnecessary early debt settlement on behalf of individual civil servants, then shouldn’t it be time they also considered paying off some amounts outstanding to retirees and their children?
However, we believe that the action of making Promises just before the elections is a normal part of the electoral process and we are confident that ZAMBIANs will judge fairly between the political party promises, BOTH from the ruling PF and also from us in the OPPOSITION.