A Originalidade Conservada, Difundindo a Informação
Thursday, April 19, 2018
Como o balão de dívidas, Lungu evita os holofotes
20TH ABRIL DE 2018
O ministro das Finanças inicia negociações de crise com o FMI depois que o governo não consegue convencer os credores
Como os líderes dos 53 estados membros da Commonwealth se reuniram em Londres para a cúpula de 15 a 17 de abril, um chefe de Estado africano estava visivelmente ausente. Em meio à crescente preocupação de que a dívida da Zâmbia tenha aumentado para níveis incontroláveis em seu turno, o presidente Edgar Lungu se mantém fora dos holofotes internacionais (AC Vol 59 No 7, No vale da dívida). Seu país está à beira da crise e a queda na economia está prejudicando o poder de barganha da nação rica em cobre.
Sob o fogo de opositores - e, cada vez mais, de membros de sua própria Frente Patriótica governante - Lungu optou por evitar questões duras sobre o fracasso da dívida e seu fracasso em iniciar o diálogo sobre reformas políticas com líderes da oposição, como previamente acordado com o Secretário Geral da Commonwealth , Baronesa Escócia (AC Vol 58 No 22, Hichilema empurra para as conversações da Commonwealth).
Depois de algumas semanas difíceis em que surgiram mais notícias sobre os níveis crescentes de endividamento na Zâmbia, funcionários do Ministério das Finanças se encontraram com investidores em Londres em 16 de abril para amenizar ansiedades. A ministra das Finanças, Margaret Mwanakatwe, estava ausente; problemas médicos recentes restringem severamente a quantidade de viagens que ela faz. Em vez disso, ela voou para Washington DC para as reuniões da primavera do Fundo Monetário Internacional.
Mwanakatwe está tentando convencer o Fundo de que o governo tem a situação sob controle, em um esforço para reconstruir a confiança e garantir um programa financiado pelo FMI. Sua tarefa não é fácil. A confiança na competência e integridade do governo atingiu um ponto mais baixo, e a oposição alega que a dívida externa da Zâmbia pode ser até duas vezes maior do que a relatada pelo governo e agora está sendo levada a sério por investidores e analistas.
A última edição do Africa Confidential publicou mais evidências de que a Zâmbia está à beira do endividamento, com a dívida real do país provavelmente em torno de 100% do PIB (AC Vol 59 No 7, No vale da dívida). Seguindo o relatório da AC e as preocupações expressas por investidores em outras mídias, que outras dívidas ainda não foram divulgadas, as Eurobonds da Zâmbia caíram ainda mais com o Congo-Brazzaville. O Congo-B está oficialmente em situação de endividamento após a descoberta de empréstimos não declarados no ano passado, elevando seus níveis de endividamento em relação ao PIB para 120% (AC Vol 58 No 19, False start to IMF talks).
Embora a situação da Zâmbia ainda não seja tão dolorosa, a reação do mercado reflete a profunda incerteza sobre suas dívidas e uma severa perda de confiança no governo. O fundo de investimento Nomura International estava em negociações no ano passado com o governo de Lusaka para fornecer um empréstimo urgente de US $ 500 milhões para refinanciar as dívidas governamentais existentes; Agora ouvimos que não são as Eurobonds. Nomura foi franco sobre a crise, rebaixando sua avaliação do risco de investir na Zâmbia de "neutra" para "cautelosa".
Sem restrições
A falta de clareza está prejudicando a reputação da Zâmbia e alimentando suspeitas sobre 'empréstimos ocultos'. Em vez de o governo ocultar activamente projectos inteiros financiados por empréstimos já contratados, como aconteceu em Moçambique, a confusão aqui é sobre os métodos do governo para reportar a dívida e a consistência com que o fez. Acredita-se que o sub-registro da Zâmbia resultou em números artificialmente baixos (AC Vol 58 No 14, Rock e Kroll & Vol 58 No 25, Tropeçando em uma crise da dívida).
É também incontestável que a Zâmbia continua a contratar e a planear novos empréstimos a uma taxa insustentável sem avaliação da relação custo-benefício. Não pode arcar com os bilhões de dólares de empréstimos comerciais externos que já estão em andamento.
Portanto, o governo da Zâmbia está carente de dinheiro e não pode pagar fornecedores por bens vitais, como medicamentos e fertilizantes, mas continua a avançar com projetos grandiosos e superfaturados de crédito. A execução do orçamento é difícil, alguns críticos descrevem-no como um mero "orçamento em papel". Eles relatam que, na prática, mais de 60% são pagos e pagos pelos funcionários. Com quase outros 30% necessários para o serviço da dívida, isso deixa 10% para todo o resto.
O aperto fiscal levou a problemas com o pagamento de fornecedores e descontos de IVA. Os atrasos no mercado interno - que, segundo o governo, chegaram a 12,7 bilhões de kwacha (US $ 1,3 bilhão) no final de 2017 - estão se acumulando rapidamente. Isto está agora associado a um impulso agressivo do governo para aumentar as receitas fiscais. O resultado é uma comunidade empresarial cada vez mais hostilizada e serviços básicos em perigo (veja Box, Robbing Pierre para pagar Lazarus).
Além de refutar algumas das alegações infundadas que emergiram no crescente pânico - que o governo não cumpriu sua dívida chinesa, por exemplo -, um comunicado divulgado por Mwanakatwe este mês sobre o estoque da dívida e "percepção de empréstimos ocultos" é válido. Pouca água. Se alguma coisa, confirmou a escala do problema e como o governo está ansioso para acalmar os mercados, particularmente porque a Zâmbia precisará em breve refinanciar seus US $ 3 bilhões. Eurobonds.
Fontes do governo dizem que a alegação de Mwanakatwe de que toda dívida do governo é declarada com precisão da maneira correta está longe da verdade. As próprias investigações da AC mostram que, sem o controle central adequado ou relatórios consistentes, a gestão da dívida foi interrompida.
Os números do Escritório de Gestão da Dívida tendem a flutuar, nós entendemos. E, excepcionalmente, ministérios individuais são capazes de emitir dívida sem consultar o Ministério das Finanças - uma prática que ouvimos o ex-ministro das Finanças, Felix Mutati, tentando mudar.
Empréstimos se acumulam
À medida que aumenta a pressão sobre o governo em relação à subnotificação de empréstimos, Mwanakatwe aumentou o valor da dívida externa para 2017 de US $ 7,9 bilhões. para US $ 8,7 bilhões.
Em sua apresentação sobre o estado da economia no primeiro trimestre de 2018, publicada em 6 de abril, ela disse que o aumento resultou principalmente da 'reclassificação' de '$ 500 milhões. dívida de combustível 'como externa. O relatório econômico anual de 2017, finalmente publicado em 12 de abril, mostra que ela está de fato se referindo a US $ 590 milhões. empréstimo para financiar as importações de combustíveis.
A própria informação do AC mostra que este foi contratado pelo Banco de Comércio e Desenvolvimento - o braço financeiro do Mercado Comum da África Oriental e Austral (Comesa), conhecido anteriormente como Banco PTA - em março de 2016. Não está claro por que o governo não registrou este em seu estoque da dívida externa por dois anos consecutivos, ou como foi classificado se não considerado externo, nem se foi reportado corretamente ao FMI. O Fundo observou em 2017 que o governo devia US $ 420 milhões. em atraso ao PTA Bank que foram omitidos sem explicação do estoque total da dívida.
Há claras discrepâncias entre os números anuais da dívida externa do FMI e suas estimativas dos números totais e do valor dos empréstimos contraídos e do governo (ver gráfico). O valor da dívida externa do FMI para o final de 2016 é de US $ 7,9 bilhões; se adicionarmos os $ 1,75 bilhões. contratado em 2017, mais os US $ 590 milhões. dívida de combustível, o total é de US $ 10,24 bilhões. Combinando a confusão, as próprias tabelas do FMI indicam empréstimos acumulados até o final de 2016 de mais de US $ 11 bilhões.
O valor mais baixo não pode ser explicado por dívidas pagas. O Fundo não respondeu com uma explicação, pois a AC levantou esse problema em dezembro. O cálculo da dívida externa pelo próprio CA continua em aproximadamente US $ 13 bilhões, com US $ 2 bilhões. iminentemente no pipeline.
Embora tenha emitido alertas firmes de que a Zâmbia corre grande risco de contrair dívidas, o FMI ainda não apresentou publicamente os números que recentemente compartilhou com doadores, que cobriam dívidas paraestatais que o governo geralmente omite. Ouvimos dizer que o Fundo não tem certeza se compreendeu totalmente a extensão da dívida da Zâmbia com a China, que fontes do Ministério das Finanças dizem não ser relatadas de forma confiável.
Preocupante, o relatório de 2017 do governo também observa que os números de 2017 são "preliminares" - embora o relatório tenha sido publicado no final do primeiro trimestre de 2018 - e sugere que eles ainda poderiam ser revisados.
Uma análise de sustentabilidade da dívida (DSA) está em andamento e, a portas fechadas, os funcionários estão freneticamente tentando somar os números. Mas esse processo ainda não está completo. Muitos acham que a situação se tornou tão ruim que, sem alguma forma de auditoria externa, os resultados da ASD não podem ser considerados confiáveis - e o governo existente é ainda menos numeroso. Roubando Pierre para pagar Lázaro
O governo sem dinheiro da Zâmbia está tentando atrapalhar a pressão financeira de administrar uma pilha de dívidas em rápido crescimento usando uma combinação de tributação agressiva e não pagar fornecedores. A estratégia está aumentando os atrasos internos e antagonizando os negócios em um momento em que os investidores já estão pensando duas vezes em colocar dinheiro no país.
Em março, o governo aparentemente tentou resolver a crise iminente exigindo publicamente que a mineradora canadense First Quantum Minerals pagasse à Zâmbia US $ 8 bilhões. Autoridade Tributária da Zâmbia (ZRA), que deve o FQM
$ 160 milhões em devidos descontos de IVA, disseram à FQM que tinha cinco dias para pagar cerca de 142 milhões de dólares. em direitos mais bilhões em multas e juros, incidindo em 5% desde 2012.
A FQM afirma que a demanda é infundada e que a empresa recebeu três meses para realizar sua própria auditoria. Insiders dizem à AC que a reivindicação da ZRA de pagamentos de deveres perdidos está errada e que os bens isentos de impostos foram reclassificados erroneamente em uma auditoria de turbilhão. A ZRA vê os pagamentos de impostos como uma maneira rápida de levantar dinheiro e as minas como alvos fáceis, mas mesmo fontes próximas ao governo são particularmente críticas quanto ao ataque da ZRA ao FQM. Embora nenhuma outra mineira tenha sido atingida por uma conta da magnitude da apresentada ao FQM - o maior contribuinte do governo - as empresas de mineração estão agora sujeitas a auditorias agressivas.
Enquanto isso, os três maiores fornecedores farmacêuticos pararam de fornecer medicamentos e equipamentos básicos porque o governo lhes deve US $ 25 milhões. À beira de uma escassez nacional de remédios, o ministro da Saúde, Chitalu Chilufya, pediu aos doadores que restabeleçam o financiamento da cesta - uma solicitação recebida sem entusiasmo, ouvimos. Ele também escreveu ao presidente Edgar Lungu para solicitar financiamento de emergência, que provavelmente virá das receitas de pedágio.
Enquanto isso, o Ministério da Saúde está buscando um ambicioso programa de expansão que inclui o empréstimo de centenas de milhões de dólares para novos hospitais, bem como aquisições suspeitamente caras através de intermediários politicamente conectados, incluindo 50 ambulâncias ao custo de US $ 288.000 cada. A Toyota, fabricante das ambulâncias, informa que cada uma valia apenas 60 mil dólares.
A inflação de preços, suspeita-se que fosse para fins de comissões de escumação, poderia ter pago quase metade de todas as dívidas pendentes a fornecedores de saúde e assegurado que os hospitais públicos continuassem abastecidos com medicamentos vitais.
O governo de Edgar Lungu não tem planos de parar de gastar, mas a quantidade que deve está crescendo rapidamente além do controle
Exigências de clareza sobre a dívida nacional da Zâmbia estão se intensificando, enquanto o impasse com o Fundo Monetário Internacional continua e altos membros do governo temem um estilo do Zimbábue ...
Vol 58 No 22 | ZÂMBIA
Hichilema empurra para conversações da Commonwealth
3 de novembro de 2017
Negociações sobre a reforma política entre o Presidente Lungu e a oposição são devidas, mas muitas dúvidas de que ele levará o processo a sério
O enviado especial da Commonwealth, Ibrahim Gambari, deve intervir em Lusaka este mês para mediar as conversações entre a Frente Patriótica dominante do Presidente Edgar Lungu e os partidos da oposição como parte do ...
Vol 58 No 19 | CONGO-BRAZZAVILLE
Falso começo às conversações do FMI
22 de setembro de 2017
A tentativa do governo de enganar o Fundo sobre a escala de suas dívidas não é um bom presságio para suas negociações
Poucos países podem ter garantido como um comunicado de imprensa concisa como o emitido pelo Fundo Monetário Internacional sobre a reunião de sua chefe, Christine Lagarde, com o Presidente Deni ...
Vol 58 No 14 | MOÇAMBIQUE
Rock e Kroll
7 de julho de 2017
Um resumo da tão esperada auditoria dos empréstimos secretos de US $ 2 bilhões está fora. Ele revela que eles eram todos fanfarrão e sem estrondo
A auditoria feita pela Kroll Associates aos empréstimos concedidos a três supostos projetos marítimos fala sobre os empréstimos de US $ 2 bilhões que não foram gastos, mas não para onde realmente foi o dinheiro. O se ...
The finance minister starts crisis talks with the IMF after the government fails to convince creditors
As leaders of the 53 Commonwealth member states gathered in London for the 15-17 April summit, one African head of state was conspicuously absent. Amid growing concern that Zambia's debt has ballooned to unmanageable levels on his watch, President Edgar Lungukeeps out of the international spotlight (AC Vol 59 No 7, Into the valley of debt). His country is on the brink of crisis and the slide in the economy is damaging the copper-rich nation's bargaining power.
Under fire from opponents – and, increasingly, from members of his own governing Patriotic Front – Lungu chose to avoid tough questions over both the debt debacle and his failure to begin dialogue on political reforms with opposition leaders, as previously agreed with the Commonwealth Secretary General, Baroness Scotland (AC Vol 58 No 22, Hichilema pushes for Commonwealth talks).
After a difficult few weeks in which more news broke about Zambia's rising debt levels, Ministry of Finance officials met with investors in London on 16 April to assuage anxieties. Finance Minister Margaret Mwanakatwe was absent; recent medical problems severely restrict how much travel she does. Instead she flew to Washington DC for the International Monetary Fund's spring meetings.
Mwanakatwe is trying to convince the Fund that the government has the situation under control, in an effort to rebuild trust and secure an IMF-funded programme. Her task is not easy. Confidence in the government's competence and integrity has hit an all-time low, and opposition claims that Zambian external debt could be as much as twice the level reported by the government are now being taken seriously by investors and analysts.
The last issue of Africa Confidential published further evidence that Zambia is teetering on the brink of debt distress, with the country's real debt probably around 100% of GDP (AC Vol 59 No 7, Into the valley of debt). Following the AC report and worries voiced by investors in other media, that other debts are yet to be reported, Zambia's Eurobonds fell further to a par with Congo-Brazzaville. Congo-B is officially in debt distress after the discovery of undeclared loans last year sent its debt-to-GDP levels rocketing to 120% (AC Vol 58 No 19, False start to IMF talks).
Although Zambia's situation is not yet so woeful, the market reaction reflects deep uncertainty over its debts and a severe loss of confidence in the government. The Nomura International investment fund was in negotiations last year with the Lusaka government to provide an urgent loan of $500 million to refinance existing government debts; we now hear that these are not the Eurobonds. Nomura has been outspoken about the crisis, downgrading its assessment of the risk of investing in Zambia from 'neutral' to 'cautious'.
No restraints
The lack of clarity is damaging Zambia's reputation and fueling suspicions over notional 'hidden loans'. Rather than the government actively concealing entire projects funded by already contracted loans, as happened in Mozambique, the confusion here is over the government's methods for reporting debt and the consistency with which it has done so. It is thought that Zambian under-reporting has resulted in artificially low figures (AC Vol 58 No 14, Rock and Kroll & Vol 58 No 25, Stumbling into a debt crisis).
It is also beyond doubt that Zambia is continuing to contract and plan new loans at an unsustainable rate without assessment of value for money. It can ill afford the billions of dollars of external commercial loans that are already in the pipeline.
So cash-strapped is the Zambian government that it cannot pay suppliers for vital goods such as medicines and fertiliser, yet it continues to press ahead with grandiose and overpriced projects on credit. Executing the budget is difficult, some critics describing it as a mere 'paper budget'. They report that, in practice, more than 60% goes on officials' pay and perks. With almost another 30% needed for debt service, that leaves 10% for everything else.
The fiscal squeeze has led to problems with paying suppliers and VAT rebates. Domestic arrears – which the government says stood at 12.7 billion kwacha (US$1.3 bn.) at the end of 2017 – are fast piling up. This is now coupled with an aggressive drive by the government to increase tax revenues. The result is an increasingly antagonised business community and basic services in jeopardy (see Box, Robbing Pierre to pay Lazarus).
Aside from its rebuttals of some of the unfounded allegations that have emerged in the growing panic – that the government has defaulted on its Chinese debt, for instance – a statement issued by Mwanakatwe this month on the debt stock and 'perception of hidden loans' holds little water. If anything, it confirmed the scale of the problem and how anxious the government is to calm the markets, particularly as Zambia will soon need to refinance its $3 bn. Eurobonds.
Government sources say that Mwanakatwe's claim that all government debt is accurately declared in the proper manner is far from the truth. AC's own investigations show that, without proper central control or consistent reporting, debt management has broken down.
The Debt Management Office figures have tended to fluctuate, we understand. And, unusually, individual ministries are able to issue debt without consulting the Ministry of Finance – a practice that we hear the former Finance Minister Felix Mutatiwas trying to change.
Loans pile up
As pressure mounts on the government over under-reporting of loans, Mwanakatwe has increased the external debt figure for 2017 from $7.9 bn. to $8.7bn.
In her State of the Economy presentation for the first quarter of 2018, published on 6 April, she said that the increase resulted mainly from the 'reclassification' of a '$500 mn. fuel debt' as external. The 2017 annual economic report, finally published on 12 April, shows that she is in fact referring to a $590 mn. loan to finance fuel imports.
AC's own information shows this was contracted from the Trade and Development Bank – the financial arm of the Common Market for Eastern and Southern Africa (Comesa) formerly known as PTA Bank – in March 2016. It is not clear why the government failed to register this in its external debt stock for two years running, or how it was classified if not regarded as external, nor if it was reported correctly to the IMF. The Fund noted in 2017 that the government owed $420 mn. in arrears to PTA Bank which were omitted without explanation from the total debt stock.
There are clear discrepancies between the IMF's annual external debt figures, and its estimates of the total numbers and value of loans contracted, and those of the government (see chart). The IMF's external debt figure for end 2016 is $7.9 bn.; if one adds the $1.75 bn. contracted in 2017, plus the $590 mn. fuel debt, the total is $10.24 bn. Compounding the confusion, the IMF's own tables indicate cumulative loans by end 2016 of over $11 bn.
The lower figure cannot be explained by debts having been paid off. The Fund has not responded with an explanation since AC raised this problem in December. AC's own calculation of external debt remains at roughly $13 bn., with $2 bn. imminently in the pipeline.
Though it has issued firm warnings that Zambia runs great risk of debt distress, the IMF has not yet publicly presented the numbers it recently shared with donors, which covered parastatal debts that the government usually omits. We hear that the Fund is unsure if it has fully understood the extent of Zambia's debt with China, which sources at the Ministry of Finance say is not reliably reported.
Worryingly, the government's 2017 report also notes that the 2017 figures are 'preliminary' – though the report was published at the end of the first quarter of 2018 – and suggests that they could yet be revised.
A debt sustainability analysis (DSA) is under way and behind closed doors officials are frantically trying to add up the numbers. But this process is not complete as yet. Many feel the situation has become so bad that, without some form of external audit, the results of the DSA cannot be considered reliable – and the existing government figures even less so.
Robbing Pierre to pay Lazarus
Zambia's cash-strapped government is trying to muddle through the financial strain of managing a fast-growing pile of debt using a combination of aggressive taxation and not paying suppliers. The strategy is driving up domestic arrears and antagonising business at a time when investors are already thinking twice about putting money into the country.
In March, the government apparently tried to solve the impending crisis by publicly demanding that the Canadian mining company First Quantum Minerals pay Zambia US$8 billion. The Zambia Revenue Authority (ZRA), which owes FQM $160 million in overdue VAT rebates, told FQM it had five days to pay roughly $142 mn. in duties plus billions in fines and interest, levied at 5% since 2012.
FQM maintains that the demand is unfounded and the firm has been granted three months to conduct its own audit. Insiders tell AC that the ZRA's claim of missed duty payments is mistaken and that tax-exempt goods have been wrongly reclassified in a whirlwind audit. The ZRA sees duty payments as a fast way to raise cash and the mines as easy targets, but even sources close to the government are privately critical of the ZRA's assault on FQM. Although no other mine has been hit with a bill of the magnitude of the one presented to FQM – the government's biggest taxpayer – the mining companies are now subject to aggressive auditing.
Meanwhile, the three biggest pharmaceutical suppliers have stopped providing basic drugs and equipment because the government owes them $25 mn. On the brink of a nationwide shortage of medicines, Health Minister Chitalu Chilufya has asked donors to reinstate basket funding – a request met without enthusiasm, we hear. He has also written to PresidentEdgar Lunguto request emergency funding, which is likely to come from toll-gate revenues.
Meanwhile, the Ministry of Health is pursuing an ambitious expansion programme that includes borrowing hundreds of millions of dollars for new hospitals, as well as suspiciously expensive procurement through politically connected middlemen, including 50 ambulances at the cost of $288,000 each. Toyota, the manufacturer of the ambulances, reports that each was worth just $60,000.
The price inflation, suspected to be for the purposes of skimming commissions, could have paid off almost half of all the outstanding debts to health suppliers and ensured that public hospitals remain stocked with vital medicines.
Edgar Lungu's government has no plans to stop spending, but the amount that it owes is rapidly growing beyond control
Demands for clarity on Zambia's national debt are intensifying, as the standoff with the International Monetary Fund continues and senior figures in government fear a Zimbabwe-styl...
Negotiations on political reform between President Lungu and the opposition are due, but many doubt he will take the process seriously
Commonwealth Special Envoy Ibrahim Gambari is due in Lusaka this month to mediate in talks between President Edgar Lungu's ruling Patriotic Front and opposition parties as part of ...
The government's attempt to mislead the Fund over the scale of its debts does not bode well for their negotiations
Few countries can ever have warranted as terse a press release as that issued by the International Monetary Fund on the meeting of its chief, Christine Lagarde, with President Deni...
A summary of the much anticipated audit of the secret US$2 billion loans is out. It reveals they were all buck and no bang
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A mountain of loans for expensive infrastructure and equipment is rapidly growing along with other loans that many fear are unsustainable
Amid growing concerns over the scale and urgency of Zambia's impending debt crisis, the International Monetary Fund and the World Bank have joined those who believe the country is ...
The finance minister starts crisis talks with the IMF after the government fails to convince creditors
As leaders of the 53 Commonwealth member states gathered in London for the 15-17 April summit, one African head of state was conspicuously absent. Amid growing concern that Zambia's debt has ballooned to unmanageable levels on his watch, President Edgar Lungukeeps out of the international spotlight (AC Vol 59 No 7, Into the valley of debt). His country is on the brink of crisis and the slide in the economy is damaging the copper-rich nation's bargaining power.
Under fire from opponents – and, increasingly, from members of his own governing Patriotic Front – Lungu chose to avoid tough questions over both the debt debacle and his failure to begin dialogue on political reforms with opposition leaders, as previously agreed with the Commonwealth Secretary General, Baroness Scotland (AC Vol 58 No 22, Hichilema pushes for Commonwealth talks).
After a difficult few weeks in which more news broke about Zambia's rising debt levels, Ministry of Finance officials met with investors in London on 16 April to assuage anxieties. Finance Minister Margaret Mwanakatwe was absent; recent medical problems severely restrict how much travel she does. Instead she flew to Washington DC for the International Monetary Fund's spring meetings.
Mwanakatwe is trying to convince the Fund that the government has the situation under control, in an effort to rebuild trust and secure an IMF-funded programme. Her task is not easy. Confidence in the government's competence and integrity has hit an all-time low, and opposition claims that Zambian external debt could be as much as twice the level reported by the government are now being taken seriously by investors and analysts.
The last issue of Africa Confidential published further evidence that Zambia is teetering on the brink of debt distress, with the country's real debt probably around 100% of GDP (AC Vol 59 No 7, Into the valley of debt). Following the AC report and worries voiced by investors in other media, that other debts are yet to be reported, Zambia's Eurobonds fell further to a par with Congo-Brazzaville. Congo-B is officially in debt distress after the discovery of undeclared loans last year sent its debt-to-GDP levels rocketing to 120% (AC Vol 58 No 19, False start to IMF talks).
Although Zambia's situation is not yet so woeful, the market reaction reflects deep uncertainty over its debts and a severe loss of confidence in the government. The Nomura International investment fund was in negotiations last year with the Lusaka government to provide an urgent loan of $500 million to refinance existing government debts; we now hear that these are not the Eurobonds. Nomura has been outspoken about the crisis, downgrading its assessment of the risk of investing in Zambia from 'neutral' to 'cautious'.
No restraints The lack of clarity is damaging Zambia's reputation and fueling suspicions over notional 'hidden loans'. Rather than the government actively concealing entire projects funded by already contracted loans, as happened in Mozambique, the confusion here is over the government's methods for reporting debt and the consistency with which it has done so. It is thought that Zambian under-reporting has resulted in artificially low figures (AC Vol 58 No 14, Rock and Kroll & Vol 58 No 25, Stumbling into a debt crisis).
It is also beyond doubt that Zambia is continuing to contract and plan new loans at an unsustainable rate without assessment of value for money. It can ill afford the billions of dollars of external commercial loans that are already in the pipeline.
So cash-strapped is the Zambian government that it cannot pay suppliers for vital goods such as medicines and fertiliser, yet it continues to press ahead with grandiose and overpriced projects on credit. Executing the budget is difficult, some critics describing it as a mere 'paper budget'. They report that, in practice, more than 60% goes on officials' pay and perks. With almost another 30% needed for debt service, that leaves 10% for everything else.
The fiscal squeeze has led to problems with paying suppliers and VAT rebates. Domestic arrears – which the government says stood at 12.7 billion kwacha (US$1.3 bn.) at the end of 2017 – are fast piling up. This is now coupled with an aggressive drive by the government to increase tax revenues. The result is an increasingly antagonised business community and basic services in jeopardy (see Box, Robbing Pierre to pay Lazarus).
Aside from its rebuttals of some of the unfounded allegations that have emerged in the growing panic – that the government has defaulted on its Chinese debt, for instance – a statement issued by Mwanakatwe this month on the debt stock and 'perception of hidden loans' holds little water. If anything, it confirmed the scale of the problem and how anxious the government is to calm the markets, particularly as Zambia will soon need to refinance its $3 bn. Eurobonds.
Government sources say that Mwanakatwe's claim that all government debt is accurately declared in the proper manner is far from the truth. AC's own investigations show that, without proper central control or consistent reporting, debt management has broken down.
The Debt Management Office figures have tended to fluctuate, we understand. And, unusually, individual ministries are able to issue debt without consulting the Ministry of Finance – a practice that we hear the former Finance Minister Felix Mutatiwas trying to change.
Loans pile up As pressure mounts on the government over under-reporting of loans, Mwanakatwe has increased the external debt figure for 2017 from $7.9 bn. to $8.7bn.
In her State of the Economy presentation for the first quarter of 2018, published on 6 April, she said that the increase resulted mainly from the 'reclassification' of a '$500 mn. fuel debt' as external. The 2017 annual economic report, finally published on 12 April, shows that she is in fact referring to a $590 mn. loan to finance fuel imports.
AC's own information shows this was contracted from the Trade and Development Bank – the financial arm of the Common Market for Eastern and Southern Africa (Comesa) formerly known as PTA Bank – in March 2016. It is not clear why the government failed to register this in its external debt stock for two years running, or how it was classified if not regarded as external, nor if it was reported correctly to the IMF. The Fund noted in 2017 that the government owed $420 mn. in arrears to PTA Bank which were omitted without explanation from the total debt stock.
There are clear discrepancies between the IMF's annual external debt figures, and its estimates of the total numbers and value of loans contracted, and those of the government (see chart). The IMF's external debt figure for end 2016 is $7.9 bn.; if one adds the $1.75 bn. contracted in 2017, plus the $590 mn. fuel debt, the total is $10.24 bn. Compounding the confusion, the IMF's own tables indicate cumulative loans by end 2016 of over $11 bn.
The lower figure cannot be explained by debts having been paid off. The Fund has not responded with an explanation since AC raised this problem in December. AC's own calculation of external debt remains at roughly $13 bn., with $2 bn. imminently in the pipeline.
Though it has issued firm warnings that Zambia runs great risk of debt distress, the IMF has not yet publicly presented the numbers it recently shared with donors, which covered parastatal debts that the government usually omits. We hear that the Fund is unsure if it has fully understood the extent of Zambia's debt with China, which sources at the Ministry of Finance say is not reliably reported.
Worryingly, the government's 2017 report also notes that the 2017 figures are 'preliminary' – though the report was published at the end of the first quarter of 2018 – and suggests that they could yet be revised.
A debt sustainability analysis (DSA) is under way and behind closed doors officials are frantically trying to add up the numbers. But this process is not complete as yet. Many feel the situation has become so bad that, without some form of external audit, the results of the DSA cannot be considered reliable – and the existing government figures even less so.
Robbing Pierre to pay Lazarus
Zambia's cash-strapped government is trying to muddle through the financial strain of managing a fast-growing pile of debt using a combination of aggressive taxation and not paying suppliers. The strategy is driving up domestic arrears and antagonising business at a time when investors are already thinking twice about putting money into the country.
In March, the government apparently tried to solve the impending crisis by publicly demanding that the Canadian mining company First Quantum Minerals pay Zambia US$8 billion. The Zambia Revenue Authority (ZRA), which owes FQM $160 million in overdue VAT rebates, told FQM it had five days to pay roughly $142 mn. in duties plus billions in fines and interest, levied at 5% since 2012.
FQM maintains that the demand is unfounded and the firm has been granted three months to conduct its own audit. Insiders tell AC that the ZRA's claim of missed duty payments is mistaken and that tax-exempt goods have been wrongly reclassified in a whirlwind audit. The ZRA sees duty payments as a fast way to raise cash and the mines as easy targets, but even sources close to the government are privately critical of the ZRA's assault on FQM. Although no other mine has been hit with a bill of the magnitude of the one presented to FQM – the government's biggest taxpayer – the mining companies are now subject to aggressive auditing.
Meanwhile, the three biggest pharmaceutical suppliers have stopped providing basic drugs and equipment because the government owes them $25 mn. On the brink of a nationwide shortage of medicines, Health Minister Chitalu Chilufya has asked donors to reinstate basket funding – a request met without enthusiasm, we hear. He has also written to PresidentEdgar Lunguto request emergency funding, which is likely to come from toll-gate revenues.
Meanwhile, the Ministry of Health is pursuing an ambitious expansion programme that includes borrowing hundreds of millions of dollars for new hospitals, as well as suspiciously expensive procurement through politically connected middlemen, including 50 ambulances at the cost of $288,000 each. Toyota, the manufacturer of the ambulances, reports that each was worth just $60,000.
The price inflation, suspected to be for the purposes of skimming commissions, could have paid off almost half of all the outstanding debts to health suppliers and ensured that public hospitals remain stocked with vital medicines.
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