GOVERNMENT has been urged to put in place a comprehensive debt strategy and policy that stipulates when to borrow as well as the terms and purpose of borrowing to create sustainable debt repayments.
Jesuit Centre for Theological Reflection (JCTR) Livingstone Outreach Regional officer George Makaha said having a comprehensive debt strategy and policy in place was the best solution to manage the debt in the coming years.
In a press statement released in Livingstone yesterday, Mr Makaha said some countries such as Nigeria had set up an Independent Debt Management Office (DMO), outside the Ministry of Finance, as a best practise.
“The best practice is to have in place a comprehensive debt strategy and policy that stipulates when to borrow, at what terms and what purpose .
“This guided by clear policy on debt that would stipulates the fact that debt should not finance recurrent expenditure but only capital expenditure due to the need to create sustainable debt repayments,” Mr Makaha said.
He said translating the country’s positive economic growth into improved living conditions might be hard to achieve if the Government did not address high fiscal deficits.
Mr Makaha noted that the reported K20 billion budget deficit recorded was of six per cent of the Gross Domestic Product (GDP).
“With financing a huge K20 billion deficit, either from internal or external sources may attract higher interest rates which put a squeeze on spending by private sector businesses and millions of households.
“Any squeeze on private sector spending will stifle the positive economic growth the country has been enjoying in the last few years and throw a lot of people out of employment, further worsening the current unemployment levels,” he said.
Mr Makaha also said a high level of Government borrowing in the face of high deficit ultimately created a mountain of debt which was currently around US$ 4.8 billion dollars.
“The debt to GDP ratio has increased drastically from 19 per cent in 2011 to 30 per cent percent as of November 2014.
“Even with the current sustainability external debt levels that the country is enjoying, care must be taken in the way new debts are contracted to avoid another debt trap,” he said.
Mr Makaha said high debt levels meant that Government would have to spend more each year in debt on interest payments to lenders, which interest could be used in more productive ways such as provision of social services and infrastructure.
He said the Government should also do more to moblilize domestic revenues including non-tax revenues to finance the Budget.
“There is need for continuous dialogue with key stakeholders before government announces any new policies.
“It is therefore important and timely that government heeds concerns expressed by various stakeholders and addresses the K20 billion budget deficit which will impact adversely on the lives of ordinary people if left unchecked,” he said.