Borrowing to pay

Thu, 27 Apr 2017 11:12:40 +0000

THE warning by the World Bank against running large fiscal deficits which lead to over-borrowing and in turn spin off high public debt levels, is timely and needs to be taken into serious consideration by developing nations such as Zambia.

The bank says for one reason or another African governments have been in the habit of spending more than they collect in domestic taxes to run their ever-increasing public expenditure, creating immense problems for their countries and people.

This is why the Economic Association of Zambia is advising Government to invest the money it borrows on projects that will generate profit which the country can use to repay the loans from private and multi-lateral lenders.

EAZ president Crispin Mpuka says this will help Zambia reduce the debt burden which others project could be nearing US $7 billion. Dr Mpuka argues that these loans should not be used for consumption, rather the money should be invested in productive ventures that will make profit which the country can use to repay the loans.

Many African governments have been accused of announcing massive national budgets which are not underpinned by sufficient resources to carry out the programmes itemised in their government white papers. Often very little effort is made to find out where the money will come from to fund these gigantic projects.

In some countries huge sums of money have been borrowed from loan sharks in the name of Euro bonds to undertake costly infrastructure works for political expediency which later turn out to be white elephants.

It is gratifying therefore to note that Government has reduced borrowing and has instead embarked on a vigorous campaign to raise local resources to fund the Budget. Over the past few months the Zambia Revenue Authority has been exceeding its targets by millions of Kwacha in a new bid to spruce up the national purse.

The recently announced plan to broaden the tax base by employing 200 tax collectors to ‘‘audit’’ small shops and other businesses in townships and remote rural areas is another commendable move to ensure we all become tax compliant and contribute to the Treasury.

In addition, Government has announced a series of austerity measures to back the economic recovery programme by getting rid of unproductive subsidies which were compelling the State to borrow. The removal of subsidy on petroleum products will go a long way in Government saving money for the benefit of economic growth.

As the World Bank says this is important for fiscal consolidation in order to narrow fiscal deficits and stabilise government debt. More importantly for countries like Zambia, as we move towards fiscal adjustment, we need to provide the right conditions for investment in order to achieve robust recovery.

As it is no one, not even the so-called foreign direct investment, can develop Zambia for us. It is our responsibility to raise the resources and use them effectively for the befit of the country.