When you give up $1bn revenue from MRT in 5 years and opt to borrow $1.4bn in 3 years
The finance minister Situmbeko Musokotwane announced the reaching of a $1.4billion staff level loan agreement with the International Monetary Fund – IMF to be disbursed over three (3) years.
This works out on a straight line basis to be a loan of $467million per year for three years ($1.4m/3yrs). Is this amount worth the deal and the conditions precedent?
The Finance Minister in his 2022 budget presentation stated that he is allowing Mineral Royalty Tax – MRT to be tax deductible which would result in an annual revenue loss of K3.2billion (about $200m). This works out to $1bn over 5 years ($200m * 5yrs).
Now, this revenue loss on MRT becoming tax deductible is premised on current copper prices which have been projected to even be on the way up and higher in the coming years on growing Copper demand for electric car boom. This means that the country could have even made more than $200m per year from MRT alone.
FQM’s Kanshanshi Mine in 2020 produced gold worth about $200 million as Zambia Gold Company Kasenseli mine which is ZCCM-IH 51% and Ministry of Finance 49% owned is said to have even higher gold deposits with potential to deliver gold worth $500million annually. Is borrowing $467m annually worth it?
We can go on and on to share Zambian projects and products that can make the government $467million annually in direct or indirect revenue which questions the decision to opt to engage the IMF for amounts that the government can raise.
Some questions to ask?
- Is the $1.4bn over 3 years worth it? Isn’t the difference too small when compared with $1bn in 5 years.
- Was MRT deductibility trade off which now works out to be a mere $267m per annum worth it?
- Why should we not work at getting gold from Kasenseli in Mwinilunga to give the nation the $467m than borrow? Are there no other options to re-structure the loans other than through this IMF deal?
- If it’s technical assistance you need from IMF, you can still get it without putting the country to negotiate on tough conditions precedent that already is not giving you time to find alternatives to sort out innovative ways to cut electricity and fuel prices without the need to immediately increase prices on already burdened citizens and business community?
- On the need for an IMF stamp to restructure the already existing debt, can’t engagement for technical support only suffice? has Lazard failed? When are you terminating their contract?
We are not in any way saying the IMF deal should be discarded if it works out to be the only option, but our collective experience and history as a nation tells us to take full precautions for the sake of posterity.
We ask again; Is this trade off to forgo straight revenue of about $1bn in MRT opting to borrowing $1.4bn in debt worth it?
-ZBT