Zambia won’t sell dollar debt in 2018 as it focuses on raising kwacha loans and increasing tax collection, Finance Minister Felix Mutati said.
The government plans to borrow 11.2 billion kwacha ($1.2 billion) from the domestic market next year, more than triple the amount in the 2017 budget.
This is part of its strategy to tilt funding in favor of the local market, after external debt bulged to $7.5 billion by mid-year from $2 billion at the end of 2011.
Africa’s second-biggest copper producer tapped the Eurobond market for $3 billion since then.
“When you look at the cost parameters of foreign-denominated instruments of borrowing and you add the exchange-rate risk, you find that you are better off borrowing on the local market,” Mr. Mutati said in an interview in Lusaka, the capital, on Thursday. The shift toward local borrowing is due to “purely issues of cost,” he said.
Debt sustainability is at the core of Zambia’s discussions with the International Monetary Fund over a $1.3 billion loan and economic program.
As the government has continued to increase borrowing, debt-servicing costs have shot up.
The southern African nation will spend 27 percent of revenue next year, its biggest expenditure item, on paying back loans, according to the budget Mutati presented to lawmakers on September 29.
Ultimately, this should be reduced to about 20 percent, freeing up resources to invest in the economy, Mutati said.