This Article is based on sessions facilitated by Chisenga Garth Phiri at a workshop facilitated by CUTS on the Loans and Guarantees Authorization Act held at Protea Hotel Chisamba, Safari Lodge on February 24th and 25th, 2022. They have also published an article on this meeting, which is in the sources below.
It has become something of a cliché for Zambia to be engrossed in conversations surrounding debt. Often, these conversations are unromantic, with words like unsustainability and mismanagement thrown around generously. Most recently, the Zambian government managed to reach a Staff Level Agreement (SLA) with the International Monetary Fund (IMF) for a three-year extended facility amounting to US$1.4bn. This may seem like a ray of hope in a gloomy sky, but Zambia isn’t out of the woods just yet.
The composition of Zambia's debt has been under serious scrutiny. For several years, most Zambia were left in the dark pertaining to who we owe and how much we owe them. CSOs have called for the cancellation of two-thirds of Zambia's debt on the grounds of odiousness, an ambitious demand if any. However, 46% of Zambia's external debt is owned by private lenders, which complicates things.
Many have attributed this complex scenario to the obscurity most public officials involved in the procurement of our public debt have operated in. Indeed, the involvement of civil society in the debt procurement and management process has left much to be desired. While calls have been made for more transparency from public officials when procuring public debt, however, without robust legislation governing the procurement and management of public debt, little can be done to improve things.
Enter the Loans and Guarantees (Authorization) Act or LGAA. Originally drafted in August of 1969, the Act was set to provide a legislative framework for the raising of loans, the establishment of sinking funds, the giving of guarantees and indemnities and the granting of loans by or on behalf of the Government. Unfortunately, recent history has shown that this is not the case.
The Act has taken many faces over the past 53 years, as most legislation does. Its current iteration – initially drafted in 1994 –was framed to guide the acquisition, management, and repayment of any public loans. In terms of policy, the act is set to follow the legal framework of most prudent public debt management strategies.
However, it has proven insufficient on multiple fronts. The Act grants several powers to the minister, including the power to procure and allocate funds towards activities without the consent of the National Assembly. This concentration of power has led many to raise concerns on poor regulation and corruption.
While the Ministry has been more transparent in the wake of the change in government, the policy framework of the Act is still flawed, leaving room for future obscurity should circumstances permit it. This means the policy framework is flawed. This flaw has already borne malicious consequences in the phenomenon known as Debt Trap Diplomacy. Debt trap diplomacy describes an instance where a creditor country or institution extending debt to a borrowing nation partially or solely to increase the lender’s political leverage.
This often translates into nasty consequences with the borrowing country having to instigate the political will of their lenders, often to the detriment of the borrowing country’s citizenry. This has manifested in Zambia’s relationship with China, with it being speculated that the leverage China has accumulated through their seemingly relentless giving has compromised our diplomatic relations.
This has compromised the interests of Zambia’s young people. Corruption is known to have its largest impact on young people. The flaws of the policy framework of the LGGA puts the efficacy of our public debt management strategy at a considerable disadvantage. It is this compromise that is speculated to be responsible for Zambia’s consistent struggle with public debt management.
As it stands, Zambia's debt situation is entering dire straits, with the unsustainability of the burden looming ominously over our macroeconomic stability. Without actionable amendments to the act, Zambia’s young people will have to continue contending with the debt burden. Our compromised political sovereignty puts us at the mercy of our lenders.
Should our creditors demand their pound of flesh – which they inevitably will – Zambia’s young people will have to compromise their socioeconomic welfare as our economic assets are leased to our creditors with little reward for the citizenry. In the long run, it puts young people at risk of significantly compromised macroeconomic stability and ensnares them in diplomatic tensions they may not be well-equipped to handle.
Fortunately, Zambia's varying civil society organizations have taken up the mantle in ensuring this is addressed. The CSO Debt Alliance has mandated itself to ensure that the interests of the Zambian citizenry are upheld as the state embarks to reduce our debt burden.
In the face of this compromise, CYLA in conjunction with the CSO Debt Alliance makes the following recommendations:
1. Power be taken away from the Minister and diluted amongst the members of the cabinet. The concentration of power to the Minister puts too much trust on their altruism. In instances where the political will of the Minister is compromised, almost all debt procured will likely have questionable implications.
2. The introduction and strengthening of clauses that protect against debt trap diplomacy. The current Acts make no explicit mention of measures to mitigate against the procurement of debt from lenders with obscure intentions.
3. The strengthening, refinement, and passing of the access to information Bill. Currently, the electorate is ignorant of the implications of the Act and its associated legislature. This compromises their ability to understand the implications of any debt procured that is underpinned by the act, whether benevolent or malicious.
With the nature of the current economic climate, we cannot expect the topic of Zambia’s debt burden to go away anytime soon. While there isn’t much to be done on its current composition, by demanding a more transparent approach to its acquisition, citizens can play a more active stake in the acquisition of any future public debt. A robust Loans and Guarantees Act is important to ensure more transparent and prudent debt management strategy, which is in the best interest of Zambia’s young people.