By Stuart Lisulo
The Zambian government has been utilizing funds from the National Pension Scheme Authority (NAPSA) to pay civil servants’ salaries, Africa Confidential has revealed.
And Africa Confidential warned that continued failure by the PF government to pay salaries on time will have disastrous political consequences after next year.
Meanwhile, Zambia’s gross international reserves could drop even further to just US $1 billion by the end of June this year from US $1.57 billion by the end of last year on account of government’s continued, excessive debt servicing, the Confidential has disclosed.
According to a report published by Africa Confidential dubbed: “Treasury in Red”, the PF government utilized funds from the pension scheme to pay civil servants’ overdue February salaries in March this year.
“The lavish spending and borrowing of President Edgar Lungu’s government is starting to catch up with it. Africa Confidential has learned that in March, it had to raid the State pension fund, the National Pension Scheme Authority (NAPSA), to pay overdue February salaries for public service employees,” Africa Confidential revealed.
“While the ruling Patriotic Front continues to deny that its debt burden poses any problem, alarm has been growing in financial circles. Standard Bank, which trades as Stanbic in Zambia and is a significant lender, has warned in a report titled ‘Déjà vu’ that the government is facing an imminent liquidity crisis.”
And the report observed that continued failure by the PF government to pay salaries on time would have disastrous political consequences after next year.
“Continued failure to pay salaries on time could be politically disastrous for the ruling Patriotic Front party, and there seems to be no solution on the horizon. After going to extreme lengths to pay February’s salaries, March brought no reprieve. Protests by trade unions are on the rise, including postal workers who say they have not been paid for more than six months. State postal company Zampost is owed large sums by government departments,” the report read.
“On 9 April, the University of Zambia Teachers and Researchers’ Union informed members that ‘it had no capacity to pay workers because the government has for the past two months failed to remit to the university’ grants and tuition fees due. The government has also halted its economically important civil service microfinance scheme, under which workers may purchase items on finance – such as IT equipment for teachers – with the cost gradually deducted from their wages. The government has stopped paying many suppliers but continued to make salary deductions, meaning effectively that it is not paying salaries in full.”
It revealed that the extent of Zambia’s liquidity crisis has necessitated suggestions by senior government officials to sell off some of the country’s prized public assets in a bid to raise much-needed cash.
“Standard Bank’s team say that asset sales are now the most likely means of raising cash – something that the government has hitherto denied. ‘This was the first time that we heard policymakers raising the possibility of asset sales to repay maturing debts,’ reported Standard Bank. Standard Bank also said that little, if anything, was being done to restructure Chinese debt,” the report read.
“The same admission was made at the International Monetary Fund Spring meetings in Washington, DC in April, say investors who were in attendance. Senior civil servants tell AC that some of the talks with China resulted from Exim Bank sending a delegation to Zambia two months ago to demand overdue payments to Chinese contractors. Insiders say that the 15 per cent down-payments Zambia was supposed to contribute to the capital for Chinese projects were borrowed, but not always paid in full to contractors as intended.”
Meanwhile, the Confidential disclosed that Zambia’s gross international reserves could drop even further to just US $1 billion by the end of June this year from US $1.57 billion by the end of last year on account of government’s continued excessive debt servicing.
“Of key concern are the foreign reserves. The government began the year with a little over US $1.5 billion in reserves, only slightly more than the US $1.4 billion of budgeted debt repayments. Central bank data shows that last year, it paid almost all its external debt service and some domestic debt from the reserves, totalling almost US $1 billion. The last officially reported figure for the reserves, in January, was US $1.45 billion. Now, Standard Bank says further repayments could have brought that down to US $1.1 billion, potentially falling to US $1 billion by June, based on its conversations with the central bank,” narrated Africa Confidential.
“Central bank governor Dr Denny Kalyalya admitted in February (2019) that the fall in reserve levels was ‘a matter of great concern’ but after its recent visit, Standard Bank remarked that there was ‘strangely…hardly any discussion of any policy measures being taken to end the erosion of external buffers’ and that any ‘plan to quell this persistent drain’ was ‘conspicuously lacking’.”