By Fanny Kalonda
FINANCIAL economist Bright Chizonde says the country is in a very desperate situation regarding its high debt amidst escalating global turbulences.
In an interview, Chizonde said if the IMF deal collapsed, the country would most likely default on the vast majority of its external debt which would lead to an international financial market blacklist.
‘’The fight against inequality, Alliance FIA among other stakeholders, have urged the new dawn government to seek other alternatives to economic recovery other than the International Monetary Fund programme. Zambia is in a very desperate situation with regards to its debt and economic prospects, especially with the escalating global turbulence,’’ he said. ‘’Zambia is like a man with a life-threatening tumor in the brain. The IMF has recommended and is willing to finance a lifesaving surgery.’’
He said although the International Monetary Fund (IMF) route looked risky for Zambians, it was the best option under the circumstance.
‘’Yes, it is a risky and painful experience to undergo such an operation, but what is the alternative? If family members demand for an alternative to the operation, what exactly does that alternative look like? Well, you can avoid the operation all together and wait for the cancer to kill you. You can also try some traditional remedies,” Chizonde said. “My point is, in our current economic predicament, the IMF is offering the most viable option. Zambia has some alternatives to this IMF deal. But none of these alternatives is better than the current IMF process. If the IMF deal collapses, Zambia will most likely default on the vast majority of its external debt. This will lead to an international financial market blacklist; meaning that the country will be considered as a bad debtor and will no longer be able to borrow from the international capital market.”
He added that the country could not afford to mess up the opportunity to deal with the debt overhang. Chizonde said the IMF offered the most viable option to the current economic predicament.
And Chizonde said that the country would most likely lose some of its national strategic assets if the IMF deal failed.
‘’Though the terms and conditions surrounding some of our bilateral debt, like the Chinese debt we have over accumulated are not known, they will certainly involve the takeover of some public entities and strategic assets. With the default status, Zambia will lose foreign direct investment and there will be massive capital outflows,’’ he said further. ‘’Since our economy is heavily dependent on FDI and external capital, we will have a significant economic downturn. This will include high inflation, unstable exchange rate and low economic growth. Ultimately, these will translate into increased cost of living and escalated poverty levels. It may now be apparent that championing for a home-grown solution, away from the IMF deal is not as fancy as it sounds. As a nation, we simply cannot afford to mess up this opportunity to deal with our debt overhang. The IMF offers the most viable option to the current economic predicament.”
Chizonde said without the IMF deal, Zambia had no capacity to pay the debt.
“In Zambia’s case, the alternatives are to wait for the inevitable default, having noted that we already lack the capacity to pay off our external debt. We can also go eastwards, toward China and others, to borrow extensively in order to pay off our current debt while auctioning off all our remaining state assets,” said Chizonde.