Use $1bn bond well, State urged

Published On April 9, 2014 » 1459 Views» By Hildah Lumba » Business, Stories
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THE ZAMBIA Association of Chambers of Commerce and Industry (ZACCI) has prodded Government to apply maximum fiscal discipline in the management of the US$1 billion sovereign bond raised from the international capital market.
And the Private Sector Development Association (PSDA) has urged Government to utilise  the $1 billion sovereign bond on developing economic sectors to avoid getting into a debt trap.
ZACCI president Geoffrey Sakulanda said it was important for the Government to apply fiscal discipline in the management of the sovereign bond and operate within its Budget to reduce the current debt deficit.
In an interview in Lusaka yesterday, Mr Sakulanda said Government should apply good financial management and ensure that there was no wastage in the resources as well as minimise Government expenditure.
This would help the Government to invest the funds into capital projects as the critical factor currently,  was how the funds would be utilised.
‘‘If the funds will be used for capital projects in order to enhance Zambia’s capacity in infrastructure and competitiveness, this means that we must improve on the quality of our communication, power, railway and road infrastructure and ensure that accessibility to  and from markets was enhanced to improve opportunities for investments,’’ he said.
Meanwhile, Mr Dodia said there was need to lend the money to sectors that had the capacity to pay back.
He  warned  in an interview in Lusaka yesterday that,  the bond if not properly utilised,  could land Zambia into a debt trap as the lending rate was much higher, at above 6.5 per cent.
He cited the debt of the 1980s which  accummulated to $6.5 billion leaving the country without capacity to pay back.
Mr Dodia said following the acquisition of the $1billion sovereign bond, Zambia’s debt portfolio has now risen to nearly $5 billion from $3.5 billion when the country secured the $750million Eurobond in 2012.
Mr Dodia said  it was important  for Government to ensure that the bond was invested in developing the country’s economy and not  consumption.
“The focus now must be to invest this money in capacity sectors that will generate quick revenue to pay back the bond and maintain the lender’s confidence,” he said.
Mr Dodia said before the bond is allocated to specific sectors, Government must analyse how the $750 million Eurobond was been utilised.
“The sovereign bond varies from a bilateral debt which can be negotiated and interest rates can be lowered, thus the funds must be used prudently to be paid back within the stipulated period of agreement,” he said
‘‘So it is imperative that this bond is utilised to grow the country’s economy, so that it will have the capacity to pay back when it matures in 10 years time. If  the funds are not properly utilised, Zambia will end up in a debt trap which will not be good for the economy,’’ Mr Dodia warned..
And  the  Zambia Consumers Association (ZACA) advised Government to invest the sovereign bond in the Agricultural sector which had the potential to grow the economy.
ZACA executive sectary Samuel Simutunda said it was also important that the bond was invested in infrastructure development as the loan had short and long term effects.
Mr Simutunda said  if the money was not invested for its intended purposes, government would create a disaster for the future generation.
Government should allow small scale farmer to form cooperatives so that they could be given funds to buy farming equipment.

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