ZCAS is delighted to join other eminent organizations, in and outside the country, in congratulating the Republican President Mr. Hakainde Hichilema and his team for providing resolute leadership on the protracted efforts to restructure the country’s unsustainable foreign debt. This effort that seemed impossible is highly commendable and deserves our praise as citizens. However, and for all of us, it must be made very clear that debt restructuring is not synonymous with debt write off but a process of modifying the terms and conditions of existing debt to enable our country to reorganize its fiscal management practices. It is about providing favourable repayment terms and conditions to make the debt more manageable and sustainable. It provides financial relief to the county to facilitate debt repayment and avoid default in the future. As such, the Country is still 100% obliged to settle the debt in full regardless of a significant maturity extension given, and reduction in interest rates for a period of three (3) years.
The announced savings by the Minister of Finance of USD 5.8 billion as a result of a successful debt restructuring is a great achievement. However, it is essential to note that these funds are not available immediately. These are savings that will accrue for the entire period of debt restructuring. Effectively, these are savings from the revenues that the country must generate overtime through yearly budget provisions but not directed towards debt servicing as the case may have been. A lot of hard work is required to ensure sufficient revenues are generated overtime, where the savings will arise in real terms. Thus, it requires high levels of productivity through increased efficiencies, to ensure more revenues are generated. Effectively, domestic revenue mobilization through various mechanisms to be established should take a center stage. It also requires a lot of fiscal discipline to ensure all revenues generated are accounted for and utilised for intended purposes. Therefore, the need for high level prudent financial management cannot be overemphasized.
As an institution mandated to train Accountants, conducting research, carrying out consultancy and providing advisory services, we take keen interest on the issue of debt restructuring. It is also our mandate to advocate for prudent public financial management. We therefore speak from our accrued experience of being a Statutory Institution that continues to grow organically. Working hard, without reliance on grants from the Treasury has become part of our ethos. Resilient and selfless leadership at Board and Management levels supported by committed employees, coupled with our ability to prudently manage the finances we generate, has sustained ZCAS since inception.
We also note that there are many factors that could lead to unsustainable debt such as poor financial management, weaknesses in corporate governance, corrupt tendances, lack of fear for public resources, inability to generate adequate revenue to service the debt, among others. However, we believe that any resource, generated, acquired, received or otherwise, should be put to good use. We take debt restructuring as a platform that can be used to establish suitable mechanisms towards revenue generation and ultimately debt repayment.
What do we need to do?
Paradigm shift in Managing our Country’s Resources
Ladies and Gentlemen, while we celebrate this momentous occasion, a question that lingers at the back of our minds is the country’s commitment to ensuring focused reserves building towards repayment of this debt when the relief period expires. A paradigm shift in managing our Country’s resources is inevitable and one of the available options is to create a sinking fund specifically for this purpose. We are aware of previous efforts, albeit futile, that were made to create a sinking fund for the purpose of saving up resources to pay these financial obligations when they fall due. However, based on the current government’s commitment to prudent financial management, we are confident that this can be done.
Arising from the need to balance between debt servicing and provision of goods and services to the citizenry, many would ask several questions, for instance:
- Is the country going to manage to generate enough revenue and avoid slipping into a state of despair as the case was?
- How do we ensure that there is enough money for medicines in our hospitals and clinics?
- How do we ensure that there is enough money to enhance our education standards?
- How do we ensure that there is enough money to support our agriculture sector?
- How do we ensure that there is enough money to support public service delivery through the civil service, defense forces, etc?
- How do we ensure increased CDF to support decentralization efforts?
- How do we ensure that the funds to be saved do not only end up in the consumption pot as opposed to production?
- Effectively, how do we balance consumption and productivity?
- Overall, how do we balance the provision of goods and services to the citizenry and at the same time continue to service debt in line with the Debt restructuring framework?
Ladies and Gentlemen, ZCAS is calling for a paradigm shift to managing our country’s resources. It is about sound public financial management and fiscal discipline in managing our resources. The prevailing tone espoused by the President on fiscal prudence needs to permeate all spheres of our public organizations namely, Ministries, Provinces, Spending Agencies, Parastatals and Other Statutory Institutions.
The Country should direct most of the financial savings into productive sectors that will not only spar social and economic emancipation for our people but also be able to raise funds in readiness for a huge debt repayment when that time comes. We are hoping to see the Government’s focus on areas that prioritize investment, increased production capacity, operational efficiency and productivity as opposed to consumption and wasteful expenditure that has characterized most public organisations. We are cognizant of the fact that if we moved in tandem with a disciplined fiscal policy, there will not only be sufficient savings to pay our debt, but also unlock resources to spar social and economic growth.
Sustainability of State-Owned Enterprises
State Owned Enterprises are ideally instruments of social and economic development that contribute to the gross domestic product, provide main sources of employment, playing significant role in upgrading labour skills and raising social standards. However, many of our parastatals have not lived up to these expectations. They continue to pose a great burden on the strained government budget for most of their operational and capital expenditure needs. This trend crowds out the pressing societal needs that government must attend to. Unfortunately, even the debt that the country is grappling with was partly channeled to some State-Owned Enterprises for whose result have not been materialized.
Our view is that the Industrial Development Corporation (IDC) should restructure its portfolio of investments in Parastatal Bodies and/or Statutory Institutions under its ambit. Companies and institutions that have enough scope to generate revenue should not be grant-aided by the Treasury but challenged to make their organisations profitable and sustainable. They need to develop business models that support their growth trajectory and sustainability. On our part as ZCAS, we have demonstrated that it is possible to grow and remain financially viable for decades without relying on government funding. On this premise, we firmly believe that it is also possible for other similar institutions such as public universities, technical colleges, and other revenue generating institutions to develop business models that are self – sustaining. It is our hope that many more public sector organisations will be hived off dependence on the Treasury to free up scarce resources for future debt repayment and pressing social needs. Therefore, we call on public sector organisations with revenue generating orientation to strive for self-reliance.
Public Sector Reforms
Ladies and Gentlemen, ZCAS is aware that part of this national debt was lost through various financial improprieties in public spending as observed in the Reports of the Auditor General and Financial Intelligence Centre (IFC). We call for a sustained change in the manner we handle public finances. Our country cannot continue to borrow while part of those proceeds ends up being misappropriated.
We are of the view that sealing such financial leakages will go a long way in saving resources for future debt repayment and other public services delivery.
We are calling for urgent enhancement of reforms in the Public Sector by strengthening internal controls as the first line of defence against financial improprieties. This will ensure that public operations and spending attain some basic fiduciary standards: in guarding against the misuse, and inefficient use of financial and human resources; safeguarding public assets; achieving budgetary objectives as set out in government spending plans; countering fraud and error; and maintaining satisfactory accounting practices to enable the government to produce timely and reliable financial and management reports for effective decision making.
In conclusion, ZCAS is confident that going forward, this debt drain crisis and its resultant fiscal burden on our country’s meagre resource envelope has provided us with enough lessons on how we should always strive to be prudent in fiscal and public financial management. To echo the President’s sentiments, it is time to work hard and ensure high levels of productivity in a bid to spar social and economic emancipation. We all need to be champions of prudent financial management. We need to guard against each other’s deeds towards a prosperous Zambia. The President and his team have done their part but together we can champion a debt free Zambia. Let us conquer debt through increased productivity and ensuring prudent financial management. We all need to change our mind sets and support the good initiatives of the New Dawn Government.
As ZCAS, we pledge to champion and launch a GREEN ribbon to symbolize and promote PRUDENT FINANCIAL MANAGEMENT AND A DEBT FREE ZAMBIA.
I thank you.
