The Policy Monitoring and Research Centre (PMRC) has praised government for initiating a debt swap with civil servants as it will give relief to public service workers and increase lending to the private sector.
PMRC Executive Director Bernadette Deka-Zulu said the development will ease the burden civil servants face in making loan repayments to financial lending institutions.
Mrs Deka-Zulu said in a press statement issued to the media that the initiative will also provide liquidity to financial lending institutions to lend to the private sector for investment in other productive sectors of the economy.
She said various loans and debt owed to public service workers have a negative impact on the daily survival of civil servants and the operations of financial lending institutions.
“Government through the Ministry of Information and Broadcasting on the 16th of July 2021 announced the debt swap between Government and civil servants as a way to ease the burden in loan repayments to financial lending institutions. It is well known that deductions from civil servants’ salaries are heavy and have adversely affected their productivity and service delivery,” said Mrs Deka-Zulu.
Mrs Deka-Zulu said the debt swap is timely and shows commitment on the part of government to address the plight of civil servants arising from the impact of loans and debts have on their survival and work performance.
“PMRC commends Government on this move as restructuring public service workers debt will ease financial burden during the pandemic by increasing disposable incomes through adjusting repayment periods with reduced interest rates in comparison to commercial rates charged by banks and other micro finance lending institutions. This measure is likely to boost the confidence of workers and consequently improve productivity and quality service provision in the civil service”, said Mrs Deka-Zulu.
She pointed out that the move by government to undertake a debt swap is legal as it is within the confines of laws that govern the employment code of civil servants right to bargain conditions of service through the Industrial and Labour Relations Act Cap. 269, part vii of the laws of Zambia.
Recently, Ministry of Information and Broadcasting Permanent Secretary Amos Malupenga announced that government had undertaken a debt swap with civil servants.
The debt will be taken over by the Public Service Micro-Finance Company which is a government institution that currently provides loans to civil servants at low interest rate which presently is at 5 per cent.
Mrs Deka-Zulu commended government for negotiating with financial lending institutions to freeze loan deductions on the pay slips of public service employees to allow for reconciliation of outstanding loans and debts.
Debts of public service workers that will remain owing to financial lending institutions after reconciliation will be transferred from financial lending institutions to the Public Service Micro-Finance Company.
Mr Deka-Zulu also praised government for releasing K200, 000,000.00 to settle various amounts owed to civil servants such as leave travel benefits, long service bonus, gratuities and other personal emoluments.
She observed that the debt swap has been formulated in line with policies and strategies that support government’s efforts of dismantling domestic arrears to ease liquidity in the economy.
Mrs Deka-Zulu said the debt swap will ease financial pressure of public service workers, and ultimately benefit the private sector by increasing the availability of financial resources to Small Medium Enterprises (SMEs).
She said the debt swap is another measure by the state to cushion the adverse effects of COVID-19 on the public service workers, SMEs and the Zambian Economy.
“Since the breakout of the COVID-19, government has implemented such measures of easing liquidity in the economy, which includes among others, paying off retirees and provision of COVID-19 stimulus packages,” said Mrs Deka-Zulu.
The PMRC Director stressed that this debt swap is a step towards the realization of the aspirations of the Economic Recovery Programme (ERP 2020-2023) where government intends to dismantle domestic areas and achieve macroeconomic stability.