Finance Minister Situmbeko Musokotwane has revealed that Zambia’s external public debt had grown uncontrollably over the past decade to almost $15 billion by June this year, including money owed by state companies.
Dr Musokotwane said that even without parastatal debt included, Zambia’s external debt in that month was estimated at $12.91 billion.
“National debt has grown uncontrollably since 2012. Year in, year out, the borrowing was spiralling out of control,” he said.
Dr Musokotwane also said Zambia aims to raise copper production to 3 million tonnes from its current less than a million tonnes in the coming decade.
Below is the full statement
MINISTERIAL STATEMENT
STATE OF THE ECONOMY ADDRESS BY THE MINISTER OF FINANCE AND NATIONAL PLANNING Dr. SITUMBEKO MUSOKOTWANE, MP, TUESDAY 5 OCTOBER 2021 (PARLIAMENT OF ZAMBIA)
Madam Speaker,
I thank you for according me this opportunity to provide a status report on the economy. In a sense, I am providing an inception report upon which a baseline is being established. The UPND administration will build on it and push forwards.
Going forwards as part of the reforms that the country needs to undertake, I think we should institutionalize the practice of an outgoing administration stating the status of the economy as they leave and an incoming administration also indicating what they have found. It is a practice found in some countries.
A practice of that nature requires that the data set for making the report be comprehensive and accurate. This needs to be build up with time because currently the data sets are not adequate in some critical areas. A good example is that of employment data.
Madam Speaker,
My presentation this afternoon will highlight macroeconomic situation as we found it, subject of course to data availability. I will also give some broad indications of the drive forwards on the economy by the UPND administration.
Madam Speaker,
Here is the summary: Our economy is faced with a number of challenges. Growth has been sluggish, fiscal deficits have been persistently high, debt is unsustainable, inflation is in double digits, the exchange rate has been volatile and interest rates have remained high.
The combination of these challenges has brought about sufferings among the people, hence the decision they took to change government. This administration stands by its campaign promise to reverse the sufferings and improve the lives of the people. It is impossible to move away from the promise of improving the peoples’ lives because then, it would have been purposeless to seek to govern.
Madam Speaker,
I start my remarks by saying something about the growth of the economy as measured by the changes in the GDP from year to year. This is one of the critical measures of the economy and it provides a quick view of its tempo. It is one of those measurements of the economy which is akin to that of a farmer measuring the yield in his farm in a particular year.
It is desirable that an economy must grow, all the times. In simple terms, this means that the production of goods and services must increase from one period to the next. In practical terms, farming produce must be higher than it was in the previous period.
The same must happen in other goods and services such as mining output, manufacturing, tourism visitors and so forth. It is this expansion in the production that increases the number of jobs, creates other business opportunities, generates money in the economy and increases the taxes paid so that your government can spend more to support education and other social services.
Over the decade up to 2021, the average growth in national economy has been significantly lower that the growth in the decade before. It is for this reason that on average, most citizens are poorer than they were ten years ago. Of course, some may be richer due to different explanations. But those are in a minority.
In 2020, the economy contracted by 2.8 percent, meaning the production of goods and services became smaller that the levels attained in 2019. The contraction was on account of negative growth in the Manufacturing, Wholesale and Retail Trade, Construction and Tourism sectors largely due to supply chain disruptions and a fall in demand.
Regarding the significant economic decline in 2020, two major factors were responsible for the outcome. The first was the COVID-19 pandemic. The second factor, and perhaps most serious, was the blowing up of the debt crisis. Huge payments of external debt drained money out of the economy, leading to closure of many businesses due to absence of demand.
The negative effects of Covid, both in Zambia and the rest of the world, are well understood. The effects included disruption of productive forces, disruption of trading arrangements and of course also, loss of human capital through deaths and hospitalizations as well as meeting unplanned heavy expenses for Covid.
It is noteworthy though that Covid merely added to two preexisting serious economic problems in the country. The first is the consequences of the excessive borrowing undertaken by the previous government during the last ten years they were in power. The second cause is the old age problem surrounding dependency on the key mining sector, which in itself has not been managed very well. Let me elaborate.
National debt has grown uncontrollably since 2012. Year in year out, borrowing has been spiraling out of control even when each year, there were promises made to manage the national financial resources more prudently.
The stock of Central Government external debt as at end June 2021 stood at US $12.91 billion. But, as per convention, when we add $1.57 billion of debt by parastatals that government guaranteed to the creditors, the total government external debt as at end June 2021, stood at US $14.48 billion.
Madam Speaker,
The debt that I have highlighted so far is just the external component. But there is also substantial domestic debt including arrears to suppliers that the government must deal with. This of course makes the situation worse. Very soon, I shall be returning to the House to provide a comprehensive statement on the national debt and the measures being undertaken to deal with it.
The growth of external debt from less than $2 billion in 2011 to its current levels of about US$14.5 billion reflects one of the worst economic blunders during the last ten years and it has significantly contributed to the suffering we see today: The government was unable to hire key personnel like teachers, the exchange rate depreciating, rising inflation and many more.
Let me elaborate on one of the effects of excessive borrowing, namely inflation. It refers to the ever continuing rise in consumer goods and services. You will recall Madam that for many years, inflation was below ten percent per year. However, as at end-August 2021, inflation was recorded at 24.4 percent which is too high and way above the 6-8 percent target band.
With the increased inflation, lending rates at banks also increased to an average of 25.6 percent in August 2021. Other than inflation, this was on account of elevated levels of borrowing by the Government. In the past decade, bank lending to the private sector has been stressed as most of the credit was taken up by the government. This must change.
For 2021, preliminary estimates indicate that the economy grew by 0.5 percent in the first quarter while growth registered 8.1 percent in the second quarter. Growth is projected to grow by above 2 percent for the whole year. This is on the back of a general improvement in the economy of the world.
It is also fair to add, Madam Speaker, that from mid-2021, a number of international initiatives to mitigate the effects of the Covid 19 pandemic permitted Zambia and other poor nations to suspend the servicing of some external debts. In other words, we are not servicing most of the debt as it falls due. This has allowed for more money to remain in the country and therefore was bound to improve the spending power of citizens.
Madam Speaker,
The overriding economic policy objective for 2022 and the medium term, will be to transform our economy, expand it and create employment opportunities.
However, Madam Speaker, we must simultaneously deal with the problem of the excessive national debt without which it will be impossible to normalize the economy, let alone to bring about fundamental economic transformation for job and wealth creation. Later this week, I shall return to the House to give an update of the debt situation of the country and the way forwards towards resolving it.
In the meantime, let me provide an idea on how the UPND administration will address the issues of employment, especially for the youth and economic well-being in general.
Madam Speaker,
We have an opportunity of a life time to transform the economy into one that grows strongly every year. From now onwards, the war cry will be economic growth, economic growth and economic growth. Everything we plan and talk about will be about strong expansion in production. And this House has an important role in this war to get production up every year. Our debates, our speeches, our priorities in the budget: All must focus on growth and everything that it takes to realise that dream.
It may be expansion of output in agriculture, manufacturing, tourist arrivals, goods transported; etc. And, of course, our mines must produce more since copper prices are forecast to remain very high in the next 15 years. This is why on many occasions UPND has expressed the intention to see copper production rise to three million tons in the next ten years and the money that this country will earn will be make everyone smile.
It is that expansion that will create direct jobs for the youths in the sectors concerned as well as indirect ones in the related ones. Expansion will generate more money for everyone including the owners of production, the employees and even for the government through higher tax revenues. These aspirations Madam Speaker are achievable. We have seen the same transformation take place during our own life time in countries like Mauritius, Malaysia, Thailand and even in a country like Vietnam which just decades ago was bombed to dust during its civil war.
Madam Speaker, these countries thirty to 40 years ago were poorer than Zambia. Today they have advanced so much. It is hard to believe that the I Pads we use in this Parliament are manufactured in the same Vietnam. Colleagues, we can do the same and liberate our nation from poverty and shame.
Towards the month end, I shall be coming to this House on the instruction of our president and government to present the 2022 Budget. In that budget the first steps in this ambitious transformative journey will start. Those will be the first steps. But they will be the defining steps of a journey of no return to poverty, but one to prosperity for all.
Madam Speaker I thank you.
Just stop moaning and get down to FIXING IT. Just get a calculator look at the figure and voila the solution is there.
The question is why was the president misleading the nation. The UPND goverment is slowing becoming a chipante pante style of goverment.Ni pano tuli
Does this figure of $15 Billion include the Chinese Debt? If so how much is Chinese Debt? Can the Minister of Finance tell the Nation the details of these loans per each Project or Transaction? We need to clearly know what Debt the New Dawn Govt is inheriting from the PF Govt after its 10 year reign. After 5 years we want to evaluate the New Dawn Govt’s performance on this issue.
“external debt went from less than $2bn in 2011 to the current $15bn” – that underlines PF’s huge mismanagement .
AND PF THINK THEY CAN COME BACK ??
WITH THIS RECORD AGAINST THEM
Meanwhile small fish like Faith Musonda can be on a board of former Minister’s proxy companies and keep dozens of bags of cash…the police can not even pin nothing on her or her partners after 9 hours of interrogation when Diggers News investigators simply went to PACRA and found all the details. What a very reckless govt PF was…this was not even a govt but a mafia all one has to do is crosscheck all proxy companies owned by former ministers investigate the partners I can guarantee you more Faith Musondas will be found.
Where did you get $38billion you estimated come from?
And you have Stephen Kamponygo and Bowman asking where free education is …when this govt has to mop up their sh”t. This minister is not even mentioning Chin ese debt as it has non disclosure clauses
Did you read about that PF shameful record ? As of August 2021, inflation was recorded at 24.4%…that’s very rotten ba PF.
So the PF was not lying about Zambia’s debt!
Every Zambian, including a street child , owes $800………
That’s the kaka we find ourselves in………
GRZ should engage isreali and other forigne bounty hunters ASAP to look for PF stolen money………@ a 25% recovery fee.
The money is outside zambia, only lose change remains in bags in people’s houses and some was used to build or buy property in zambia………
The UK, dubai , Malaysia and SA is where most of zambias stolen money is………
Even the mighty USA owes money. You knew what you were getting into and people voted for you because you said you had a solution. please kindly get down to work and cleaned up the mess as you assured the people you would.
Yaba …this minister is back the one who mislead the nation by saying that Zamtel is not profitable ati sell it…Now he is thinking and saying that nation must live and behave as if this nation has no minerals! And please stop just mentioned copper mention other minerals as well like gold, cobalt, zinc, magnesium etc we want to know how much is earn from these minerals the season of cheating and blind folding Zambians is long gone therefore careful.
Kanish minister the only thing in his head is selling! You can’t say and I quote The second cause is the old age problem surrounding dependency on the key mining sector..Mr minister is nation has plenty of minerals the nation must depend and benefit from it’s resources..And why not! Don’t mislead hichilema, like you did to RB over Zamtel…
When you buy a delapidated building you repair it. You don’t cry for the whole world to know that the building is in bad shape.
We are not going to live as if the nation has no minerals while foreigners keep on stealing..No no way the nation and it’s people must benefit not the 0.6% or 20% it’s to small or little. If you are not sure of what to do,go to Botswana.
It’s 50%-50% those investors who are not willing please let them go..full stop
@Deja Vu I have seen you comments on a number of article and the pattern is unobjective negative ranting. Either you are genuine critic or a sympathizer of the previous government. I won’t even waste my time to deal with the latter assumption but if you are the former with the good intention, I can only humbly advise you to hold your critic of a month old government just settling down. Let them work.
#11 Deja Vu
October 6, 2021 At 8:30 am
“When you buy a delapidated building you repair it. You don’t cry for the whole world to know that the building is in bad shape.”
When you buy a dilapidated building , you are expected to fix it , but if you find the whole neighbourhood of surrounding services like water , electricity is rotten as well , of course you have to let the whole world know that things were worse than you thought……….
In zambia, every system of governance is corrupted to the core by lungu……
It’s rebuilding from the bottom. People are used of free PF money…….
#13 Truth Seeker. I don’t sympathize with any political party and as a citizen I have to say it if it is not right. You posting is tantamount to threatening my freedom. If you say the PF suppressed divergent views what difference is there with what you are doing to me? For you to get upset just indicates one of or both of the two, either there’s truth in what I am saying or you are a beneficiary of what the new government is going to dish out. Please don’t try to silence me. Actually it appears you have only picked a few of my postings otherwise you wouldn’t be RANTING like that.
#14 Spaka. Right as you may be, don’t forget the AS IS BASIS principal. I’m not criticizing for the sake of it, but after being cheated by the MMD and the PF with their promises, I feel bad about things and angry so much that I can’t tolerate excuses.
F.c.u.k off iwe. Just get to work for once and do what you and your mad chi car lar of a president promised the people. Par nee yo!!
#13 Everyone knows how much damage the PF did or didn’t to this country so there’s no need to remind us please.
I normally try to avoid to question people’s reasoning but its strange that UPND supporters have failed to explain why a finance minister in RB’s administration which was called corrupt and one of his sons had to run out of the country is back again incharge and when people like Deja Vu are saying please get to work you already knew the situation and that’s why people voted for you, he is called a sympathiser of the previous regime. Secondly, ba finance minister, do you sincerely expect to have the same levels of debt with the massive infrastructure that has happened in Zambia for the past 10 years? The new airport you are enjoying, increased electricity generation, 3 new Universities, district hospitals, schools, communication towers etc are part of the $15 billion sir. Please like…
Most of zambias legacy copper mines have probably 20, 25 years…….
1) revive all industries supplying the mines.
2) ban all import of textiles for GRZ including schools, make them in zambia.
3) ban import of solar products , make them in zambia.
4) learn from countries like India, parkistan and Vietnam about local cottage street industries like refurbishing car batteries, rewiring motors , radiators , making shoes and sandles even from used car tires…….
These street industries are so advanced that imports are cut drastically and people earn a good living……
5) cut export of raw timber of indigenous trees.
Kikikikiki sounds they’ve finally realized that they have no solution to it…..I thought Zambians knew all about the debts and you campaigned on the same figures…..so now just fix the debt and that’s what you told voters stop complaining and blaming PF…am glad HH listened to Saulosi and stopped wearing surgical gloves….thanks Anthony Bwalya for telling your boss HH that Saulosi is complaining about your surgical gloves
Is $14.48 billion the true and final number that we should be quoting from now and onwards? Or do we still have some unaccounted for debt you are unaware of? Because we are tired of figures being thrown around by every time someone smokes something and feels like spouting off on this issue.
Mr. Minister, we need the final and actual debt stock that Zambia holds so that people can have intelligent discussions going forward based on facts. Honest discussions that are based on real figures and not estimates. Worse still is discussions based on conjecture. Now the ball is in your court whether you like it or not. You inherit a govt as is, not what you wish it should be. After all this is the basis of all election campaigns, isn’t it? INHERIT and then CHANGE IT!
KZ yooooooooooooooo!!!!!!!!!!! you are really a PF clearly seen from your words chi car lar!!!!!!!!!!!!!!!!!!!!!!!!! kikikikikiki
#19 Dominion
October 6, 2021 At 9:10 am
“I normally try to avoid to question people’s reasoning but its strange that UPND supporters have failed to explain why a finance minister in RB’s administration which was called corrupt and one of ……”
IMHO, RBs GRZ was a very good government that had the country moving along with debt, road building was happening , inflation and GDP figures were positive for zambia……
Apart from some family usual associated corruption , RB was a clean , good , clever president.
Anyways , that is my opinion….
Please like Deja vu said get to work sir. UPND said PF was lying about the external debt figures. It’s now over 30 days you are in government. Are you still Meticulously calculating the real value of external debt? Why are you adding domestic debt and parastatal debt? Its strange that accounting today has changed, a guarantor is the one listed in the books of the lender as debtor and not the actual borrower. It will be more honourable to tell Zambians that the numbers your friends were indicating ad external debt were actually right. We are one people, there’s no benefit in continuing to paint your brothers and sisters black even when you have discovered that it’s not everything you thought was wrong is actually wrong. They did better in some aspects.
Thank you very much Edgar China Lungu for leaving the country in total shambles. If I was Bally I wouldn’t be so forgiving – you would be in JAIL right now!
What can you expect from a govt that hires a foreigner financial company to manage its debt. PF had no clue how to go about the debt they were accumulating over the years at the expense of inflated prices and deals. This is callous on the part of the former regime. Yes they have left us with a huge debt which some of the proceeds ended in their bags and hidden like souvenir. Now it is simply time to find ways of managing this debt. We might need to brace ourselves for some serious adjustments. I feel for the common man and those lacking really!
Zambias forigne and local debt stands roughly at about $17 billion.
People who follow LT posts will remember that , that is a figure we have always used……….
HH has only reminded with one supporter by the name of Spaka like lilo…..Tarino Orange gave up on liar in chief HH
Only $15 billion debt for the country which has no manufacturing industry, but relies on importing of essential goods, including building materials even the tooth picks. What could have been happening in Zambia if only $15 Billion was borrowed in 10 years. What if we were in a country which approves $15 billion just for military and security reasons. One wonders how the government was managing things if it were just borrowing an average of $1.5b per year, but facilitated, just to mention a few: the two airports (Ndola and Lusaka),, Kazungula bridge, schools, hospitals, etc. It is my prayer that this government will do something tangible and not just talking about how carders will not return into markets and bus stations when the same carders are giving directives to government officers…
SOMETIMES I WONDER , DO WE NOW THE RIGHT PEOPLE TO RAN GOVT OR WHAT. SO HOW WHERE WE SUPPOSED TO BUILD ALL THE NEW ROADS, ALL NEW HOSPITALS, ALL THE NEW CLINICS, ALL THE DEFENSE FORCES HOUSES, ALL THE AIRPORTS , ALL THE TOLL GATES, ALL THE BRIDGES WITHOUT INCREASING ON DEBT. ZAMBIA IS NOW MASSIVELY SAVING ON FOREX THAT WE USED TO USE TO BUY SPARES FOR OUR CARS AND TRUCKS BECAUSE THERE ARE ROADS THAT HAVE BEEN DONE IN CERTAIN AREAS. THAT IS A BENEFIT. GOVT HAS REDUCED ON PAYING RENT FOR ACCOMODATING SOME DEFENSE AND POLICE FORCE PERSONEL BECAUSE THEY HAVE BUILT HOUSES AND BARRACKS. ASK THE NEW MINISTER TO WHAT WOULD HAVE BEEN THE NORMAL INCREASE IN BORROWING BY THE PF IN ORDER TO REACH THE LEVEL WHERE THEY BUILT ALL THIS INFRASTRUCTURE AND HE WONT KNOW. ITS TIME TO FORGET ABOUT PF AND…
Huge debt is as a result of pf recklessness and a lack of vision….there was no clear roadmap of how they were going to lift the nation to greater heights..
The plot of this play revolves around the anticipated stringent conditions by IMF…. blame it on PF.
Pf debt acquired during the 7 year reign of ECL was a joke…how do you acquire kaloba in such a very irresponsible way lungu is just as dull as he looks…
Brainwashed cadres, think that infrastructure development is arrived at using cow dung. This is very serious. somehave never been to Zambia as they cannot raise a ticket to fly back and see what PF has done in 10 years.
The PF government and supporters claim that they borrowed for the infrastructure development that went on. Granted. But why then did the government default on repayments? Why did they fail to employ the thousands of teachers, doctors and nurses? Why then did they fail to pay pensioners and suppliers? It is not prudent to borrow for consumption. Servicemen houses could have been built with their mortgages underwritten by government. This would have meant that the servicemen own the houses and they will not be destitute when they leave service in 10 to 15 years time. You have thousands of unemployed graduates but building more universities! the best would have been to scrap diploma colleges and transform them to universities. Missed a chance on high copper prices.
To be clear , UPND supporters are not against borrowing for infrastructure development ……….
What we are against is the irresponsible, unsustainable borrowing…….
The PF borrowing and building spree is like a farmer who has a leaking roof with rain destroying his machinery……..
Only for the farmer to borrow money and use the lot on long term paying crops instead of using some on repairing the roof and the rest on short term paying crops……
That is the PF………they should have used half the borrowed money on manufacturing jobs………
There is no reasonable infrastructure that pf has done except a few bridges around the city that have greatly contributed to inconvenience traffic flow… they deserve no credit on any point they scored because every activity was marred by corruption and thus the quality of works was substandard.
I am also getting concerned about these incessant attacks against PF as if we didn’t know. “BALLY WILL FIX IT” that’s what our current president and UPND in opposition told us during campaigns and Zambians responded positively by voting out PF, literally reducing it to a near pulp. So no need telling us about the evils PF did because we know that already. We are just waiting for HH and his new dawn administration to fulfill their campaign promises instead of creating excuses.
But these characters, before elections you fed people with alternative facts that Zambia’s debt was over 20 billion. Now we have 6 billion owed to the Chinese which you are trying to consolidate with IMF. Who do we owe the other 9 billion?
So imene figure ija ikulu — where did it come from? Did the Minister of Finance dispel those rumors bati? Nanga what the President said pakati paja? It is less sensational koma mwe. Nanga wa kadoli who have been stealing all over the place and even appearing in starring roles on Pandora Papers … timati bwa about that one anso? I think I will get back to reading ma novels, mwe. Zed is becoming a baffling documentary.
Does it mean that KZ insulting powers were not stripped? kikikiki I like you passion for pf
Mr. Musokotwane I believe you are an ACCOUNTANT and YOU know that a country is run like a GOING concern and that to EVERY CREDIT (LIABILITY) there must be a DEBIT (ASSET) thats how a balance sheet works.
Is Mr. Musokotwane telling Zambians and the whole world that the 14 Billion Dollars was just blown off or chewed by PF.
Come on UPND give us a true picture of the state of affairs of the nation, Dont just paint a gloom picture of Zambia. Talk about the ASSETS (WEALTHY) as well. The PARLEY building from where you were you reading the one side of the NATION BALANCE SHEET looks different from the last you were a Finance Minister – Money was involved just one example
Lasy time we were told 30 billion if remember very well. I will check some report on some media..if its 15 billion, no pressure…we have goid roads, hospitals, schools. Rural electrification, solar energy in economic zones…so now my good minister your job is to pay for these loans.. not crying…we have some infrastructure we needed
Poor presentation. I expected the Minister to outline the state of the economy in one or two paragraphs. Then the Minister should have spent a big chunk of his time outlining the economic programs that the UPND will implement in the short term (1 year) medium (2 to 3 years) and long term ( 5 years). Also, the reference to Malaysia, Thailand etc. is wrong and out of context. I`m beginning to doubt whether Musokotwane is the right guy to lead the Ministry of Finance. HH should have appointed a private sector guy—–who is sharp, savvy, creative, strategic, entrepreneurial and in a hurry to drive results. I`m sorry Musokotwane lacks those qualities.
@Deja Vu
…and USA also fails to pay its creditors?
Do they also skip repayments?
#49 Diadem, that is a discussion for another day.
If zI were in the opposition my tail would be up. Theres no leadership here only crybabies
#49 The USA way of avoiding defaulting is a complex that cannot be put in a few sentences.
Just beginning fixing imwe. Don’t waste time explaining addition and subtraction of money.You have just learnt that the figures PF were saying are actually true. You mislead HH to say during one of his press briefing that the debt is huge and there’s no money in the treasury. The VP in parliament struggled to explain what empty means and ended up saying what they meant was that money was not enough to meet all the obligations. Please ba Minister you have been in this seat before and we expect you to do better. HH has trusted you ahead of very good economists in UPND. Please don’t let him down. Do your job.