There is a debt crisis unfolding right now in Zambia. Many of us may not know of Zambia. It is a landlocked south African country with a population of 18 million and a GDP of $US24 billion ($F50.17b), twice that of Fiji.
It is the second largest world exporter of copper next to the Democratic Republic of Congo (DRC), which is one of its six neighbouring countries. Last month, Zambia was unable to pay interest on a US$3 billion international debt. Zambia is a timely warning for Fiji.
I will outline in this article many similarities of what is unfolding in Zambia with what we are facing in Fiji. I hope that the Zambian story will remove any remaining doubt that Fiji is sliding down the same tube unless we take remedial actions now. Zambia is a poor country with a per capita GDP of only US$1307 ($F2732), half of Fiji’s. Its incumbent Government under its sixth President, Edga Lungu, a lawyer, came into power in 2015 with a very expansionary expenditure plan.
It borrowed heavily to finance infrastructure development of roads and bridges. Zambia’s problems are twofold. The first is its poor economic management. It relied too heavily on copper exports and failed to develop its other sectors especially agriculture. As commodity prices dropped, foreign exchange began to disappear.
The second is its expansionary and wasteful fi nancial management. As revenue declined, Government is now running out of cash. Zambia’s problems started well before the coronavirus pandemic came on board. These are exactly the same problems that Fiji is facing. The Zambian debt ballooned in a very short time.
Foreign loans increased rapidly. Loan guarantees by government rose to $US1.2b ($F2.5b). These are exact mirror images of Fiji. Then the problems started to surface during the pandemic. While the Zambian Government was borrowing heavily to fi – nance the so called infrastructure development, the people could not see many signs of these spending. It is now emerging that some borrowed money was spent on political motives. Many people now suspect that the money went to people’s pockets rather than funding development.
There is perceived wide spread corruption. According to some reports, the amount of foreign loans – in Zambia’s case from China- and their conditions are not transparent. Ultimately, Zambia could not keep up with the payments of its international loans. The country defaulted on an interest payment of $US42m ($F87.80b) to a group of international lenders last month.
The Zambian Government requested the lenders for a six month suspension of loan repayments which the lender refused. However, its Vice President, only last week, in an effort to stabilise the financial market, insisted that Zambia will not default on its loans. Zambia could not keep this promise, and the country has defaulted on another interest payment due on 14th November to the same group of lenders. The lenders have said that, so far, Zambia has not produced a credible plan to sustain debt payment.
If Zambia and the lenders do not come to an arrangement, the lenders have threatened to take the country to court. Ultimately, Zambia will be forced to go hat in hand to the lender of the last resort which is the International Monetary Fund (IMF). When Zambia goes to the IMF for help, the IMF will impose strict conditions. I know this stabilisation processes very well having worked at the IMF.
The IMF will demand that Zambia immediately reduce government spending which is the root cause of its problems and may also insist that it devalues its currency. And this is when the people will start to feel the pain of adjustment. The Government may be required to reduce salaries, pensions, health spending, education budget and a whole raft of expenses. Prices will rise. GDP will take a plunge. Unemployment will increase. Poverty, which is already at 60 per cent, will rise further.
Zambia is a warning for Fiji
As I learn of the unfolding crisis in Zambia, the parallel of their policies and practices with the Fiji Government is scary.
The Fiji Government has ignored the agriculture sector. It has raised our borrowing very quickly in the name of infrastructure development. But like in Zambia, we cannot see the results of where this huge amount of debt is going. Our money is definitely disappearing somewhere. Where would that be? I believe that there are two areas that need to be investigated to help reveal where the money is disappearing to—infrastructural spending and government procurement.
Firstly, I have called for a full investigation into the operations and management of the Fiji Roads Authority which sinks a lot of taxpayers’ money into the exorbitant salaries of its CEO and overseas consultants. Good roads are being dug up and poor roads left with deep craters. The cost of rehabilitating a road is as high as $40m per kilometre when the normal cost is only $3m. Within a few weeks of repairing pot holes, they come back with a vengeance, deeper and wider. Secondly, I have called for the full audit of the procurement awards in Government to reveal the full extent of possible breaches of the law.
I have called for investigations of the award of the Rewa Dairy contract without a tender.
I hear rumours of other procurement awards that were either not tendered for or the decisions of the Major Tenders Board overturned by others. I am told of alleged political favouritism in the award of certain tenders, sometimes hidden between the multiple corporate layers of companies. We must demand investigations and corrective actions before we become another Zambia. If Unity Fiji forms Government, these are two of the areas that we will immediately clean up.
The lack of money will affect us all
People have reminded me that many ordinary people do not care too much about the level of debt. They are only concerned about what happens to them. I fully understand these views. When it comes to money, Government is not much different from a family. When the family spends more than it earns, it may take out hire purchases to buy a big smart TV, or borrow from relatives, or mortgage their homes to buy a hybrid car. If it continues to do this, one day it will not be able to pay its loans. The bailiff will come knocking.
The TV may disappear, and the family home may be sold. The children’s education may be affected. The entire family suffers. When government spends more and more money to pay debt, it will have less and less money for essential spending.
There may be no medicine when you get sick. Old age and other allowances may be reduced or withdrawn. School grants may be cut. School buildings and hospitals will be neglected. Your children and grandchildren will fi nd it very diffi cult to get a job. Taxes may rise. The Fiji dollar may be devalued. The price of essential items will rise. Life in general will become very diffi – cult. Ordinary people, wherever they are, will suffer. We are already suffering from many of these things.
The rich will protect themselves
And there is another important issue. When there is an economic crisis, the rich are better able to adjust. They have medical insurance. They can afford to buy medicines from private chemists. They have assets that they can sell. They have savings that they can access.
Some have already secured permanent residences in another country. Many have cash already stashed away in overseas accounts. So, you guessed it. The ordinary people especially the poor and most vulnerable will bear the pain and suffering. They have no savings.
They have no assets to sell. They do not have external bank accounts. They have nowhere else to go. It is a grave injustice that the people who benefi tted the least from government’s actions, will pay the most for its mistakes.
Disregard the Government’s propaganda
It is therefore critical that we make this Government accountable for its actions. This government’s propaganda will tell us that all is fi ne when we know better. The Government will tell us that we should not listen to people like me who sensationalise issues.
There is no sensationalism here. Zambia is a reality happening right now. And we may not be far behind. Please disregard the government’s spin. Look for the truth and act on it now.
Register to vote. Please register to vote, and vote to clean up this mess, restore our financial health, remove the injustices on the people and reduce poverty.
SAVENACA NARUBE is the former Governor of the Reserve Bank of Fiji and Leader of Unity Fiji. The views expressed are his own and do not necessarily refl ect the views of this newspaper.
