The Institute of International Finance has projected that Zambia’s debt could rise up to as much as 90% of the Gross Domestic Product(GDP).
IFF Associate Economist Gregory Basile said that the Institute expects Zambia’s debt to continue to grow to 90% of GDP, assuming a modest baseline.
Mr Basile however said the trajectory is highly susceptible to shocks.
“A sharp depreciation would have a significant effect, quickly raising the level of debt, before automatic dynamics take effect,” he wrote.
“On the other hand, a significant shock to real growth would not only raise the level of debt (relative to GDP), but also change the debt trajectory, “pushing” the slope of the curve up. But these channels do not operate separately.”
Mr Basile warned that if investor confidence weakens and or copper prices decline, both could experience a significant shock.
“This would balloon the debt as well as financing needs, despite long maturities on foreign debt.”