Legislators critical as external debt nears ceiling
Pauline Dikuelo | Friday April 7, 2017 17:05
By law, government can only borrow maximum of 20% of the gross domestic product (GDP) from external markets and another 20% from the domestic sources. External debt is currently at 18% and the new WUC loan would push it closer to the ceiling.
According to Members of Parliament, government should reduce unnecessary expenditure and should consider other options like borrowing from domestic commercial banks or even prioritising projects according to their urgency.
Member of Parliament (MP) for Selebi- Phikwe West, Dithapelo Keorapetse said on Tuesday these loans would require heavy payment, which may call for further increases in taxes to repay the debt adding that by so doing the government is tying down future generations to a debt, which may be unsustainably high.
The loan repayment is expected to take about 19.5 years after the four-year grace period. “Borrowing should be done as a last resort rather than taking advantage of the strong reserves and good credit rating, we indeed can destroy the future.
The government would need to demonstrate that this is the best option and that they do not have the local resources to at least fund some parts of the project from government coffers, or rather consider delaying some of the projects looking at the urgency of the matter,” he said.
In addition, MP for Mogoditshane Sedirwa Kgoroba reminded government of the prevailing difficult economic times noting that the situation could get worse.
“We are currently facing difficult economic times and as the future is unpredictable, we need to be careful and not abuse the opportunity that we are getting from the World Bank because we might need them more in future while we have exhausted our ceiling of external borrowing,” he said.
The loan is earmarked for emergency water security and efficiency projects, which were prepared in response to the 2015-2016 El Nino, related drought, which was rated the worst in the last 34 years.
The project is also be expected to support government’s ongoing efforts to integrate and manage surface and ground water resources more effectively, which includes mitigating the impact of drought by improving availability of water in settlements, improve wastewater and sludge management to support strategic investments in refurbishment and rehabilitation of wastewater treatment facilities.
World Bank country director, Paul Noumba Um told BusinessWeek earlier this year, the project will improve the availability of water supply in drought vulnerable areas, strengthen waste water management in selected systems and improve the operational efficiency of the WUC.