The Center for Trade Policy and Development says it continues to note the rapid accumulation of debt and consequent negative effects on Zambia’s economy.
CTPD Researcher Bright Chizonde says poor Debt management, limited transparency in reporting debt statistics, political economy overrides, legal shortcomings, and fiscal indiscipline continue to undermine Zambia’s economic performance.
Mr. Chizonde said Zambia’s economic growth has slowed down; foreign reserves have been rapidly depleting while interest rates remain high-limiting the growth of the private sector.
He said even in the wake of increased taxation, the government’s liquidity position has not improved due to failure to limit excessive fiscal spending.
“The need to “cut your coat according to your cloth” is much needed advice for the current situation. Government should do as much as they can to work with what is available. According to government’s official statistics, as at end of March 2019, the stock of external debt stood at $10.18 billion with Domestic debt at K58.21 billion. Moody (2019) estimates the Zambia’s debt will exceed 75 percent of gross domestic product in 2019, from around 62 percent in 2017”, Mr. Chizonde said.
He said the major concern is however not the stock but the growth rate of Zambia’s debt as in just one quarter, October to December 2018, Zambia’s gross debt increased by about US$1 billion, from US$16.5 billion at the end of September to US$ 17.5 billion at the end of December 2018.
Mr. Chizonde said the rapid increase in public debt and debt servicing has resulted in reduced budget allocations toward education, health and social protection.
He noted that the Zambian government’s drive for rapid infrastructural development has been a classic case of a failure to “cut your coat according to your cloth”, as some experts’ assert.
Mr. Chizonde said Government needs to come to terms with the fact that Zambia, like many other developing countries, cannot borrow excessively-without unleashing dare consequences on its economy.
He said the failure to implement fiscal restraints on debt accumulation has compromised debt management.
“Zambia’s debt management has a dual problem. Firstly, there exist poor policy coordination among the various government policy documents such as the Medium Term Debt Strategy and the National Budgets, which has affected effective implementation. Secondly, Zambia’s debt management strategy suffers from political overrides”, Mr. Chizonde added.
He has urged government to move to cash budgeting and spend according to the domestic resources envelop.
Mr. Chizonde said Zambia needs to limit spending to important growth enhancing projects, prioritize the construction of strategic capital infrastructure, and enter into Public Private Partnerships for the recouping of investments instead of rapidly contracting commercial loans.