OUR TREASURY IS EMPTY – UNDERSTANDING HH.
4th September, 2021
New Zambian President, H.E. Hakainde Hichilema, made two shocking revelations on a BBC interview he recently held…
1). That he inherited coffers that were literally empty.
2). That the debt situation was understated by the previous government.
Government critics have taken turns at lashing out on the President for revealing that the coffers were empty, citing loss of investor confidence as a consequence.
Others have even gone further to accuse him of lying because the government has foreign reserves amounting to US$2.9 billion.
The Zambian situation cannot be looked at with such simple lenses. If it were that simple, our past government would not have defaulted on its US$42.5 million debt payment, our country would not have slipped into a recession last year and our government then would not have repeatedly gone back and fourth to the IMF in search of a bailout.
So why did we default when we had reserves, why didn’t the government get a chunk of US$42.5 million to pay it’s debt from it’s reserves?
We need to understand, as a country, that foreign reserves amounting to as low as US$2.9 billion are shameful, and that is being very broke. We can not boast of having an import cover of five to six months, that is being broke.
What this means, for instance, is that if we had a calamity of some sort, especially in this pandemic era, we only have money enough to feed us for only 5 months. After that, we would starve to death. Does that give you confidence? Of course not.
If the government, therefore, dips into those reserves anyhow, then our import cover will further reduce say to 3 months or less.
Also, reserves are called reserves because they are reserves. By the time you reach to using your reserves then you’re BROKE!! Even the so-called critics who keep referring to the reserves should understand that going into the reserves to support our normal operations as a country means that we are heavily broke and should not reach that point.
Simple logic shows that having a debt burden of over US$27 billion while having a foreign reserve of US$2.9 billion is being broke. It can not be as empty as that.
The Patriotic Front Government survived on borrowing and heavily taxing the citizen to remain afloat. That is why the new Minister of Finance also revealed that the PF had borrowed more during the run-up to campaigns. The full extent of the debt remains unknown, but it is far much more than previously thought.
When Hichilema says that he has inherited empty coffers, he means just that.
Our External debt to GDP ratio is close to 100% if not already above 100% and that explains why the IMF had trouble striking a deal with the PF government. Our debt became unsustainable because we are broke.
The first step to recovery is accepting our real status. Once we do that, we will then begin to tackle our problems with the right energy and vigor. It does not help anyone to sugarcoat our distress levels, that in itself, is a recipe for failure.
The Government of Hakainde Hichilema has promised us transparency at all levels, we need to brace ourselves as a Citizenry because some transparent news will be too transparent and painful for us, but we need it.
Twaambo Hamakuni
UPND Member.