The World Bank says Zambia’s economy will grow more slowly than expected, expanding 3.8 percent instead of the previous forecast of 4.1 percent.
The World Bank said in a statement today that this follows weak performances of the services, mining and construction sectors.
The bank has forecast growth of 4.3 percent in 2018 and 4.7 percent in 2019.
“There remains a need to look closely at ways to improve debt management to ensure that economic growth has sustainable foundations and that borrowed money is invested wisely to ensure inclusive growth,” the World Bank said.
“Economic recovery in Zambia has been subdued in 2017, despite a bumper harvest, improvements in the generation of electricity, and an easing of monetary policy. This follows weak performances of the services, mining, and construction sectors. Growth is forecast to improve only modestly to 3.8% in 2017— up from 3.6% last year—and to strengthen to 4.3% in 2018 and to 4.7% in 2019. The forecast assumes the government will continue implementing its economic reform program, Zambia Plus,” it said.
And in its 10th Economic Brief for Zambia, the World Bank notes that this year, Zambia took the new step of publishing a medium-term debt strategy, and opportunities to refine it and turn it into a rolling strategy, updated annually, can be pursued as it moves forward with it.
The brief titled “How Can Zambia borrow with Sorrow”, the World Bank proposes the strategy should not only guide a slowing down of the accumulation of debt, but should also shift the composition of it and manage the risks of the country’s debt portfolio.
The report says Zambia’s government should have an internal borrowing plan to use in pursuit of the objectives in the medium-term debt strategy. Countries all over the world borrow to finance their investment and development: Zambia is no different, and it has huge and immediate infrastructure needs.
The report notes that a little over 10 years after a major debt relief effort, the rapid accumulation of debt has once again put Zambia in the spotlight.
“Debt is an important source of development finance, and a key tool for eradicating poverty,” said Gregory Smith, World Bank Senior Economist. “The debt needs to be managed carefully and the proceeds of borrowing shrewdly invested,” he added.
The report says a new and more active approach to debt management is needed now that Zambia is tapping capital markets and has many sources of borrowing. This means implementing a well-crafted strategy to reduce the cost of borrowing, extend the terms, and diversify the sources of debt funding. “There remains a need to look closely at ways to improve debt management to ensure that economic growth has sustainable foundations,” said the World Bank’s Country Manager for Zambia, Ina-Marlene Ruthenberg, “and that borrowed money is invested wisely to ensure inclusive growth.”