Zambia Heading Towards Debt Crisis-Prof Saasa

Zambia Heading Towards Debt Crisis-Prof Saasa


THE Centre for Trade Policy and Development CTPD has launched the Debt study on weathering the storm of rising public debt.
In presenting the findings of the study, CTPD Researcher Bright Chizonde, noted that Zambia’s debt management strategy had been cited to be based on pronouncements instead of quantifiable targets and benchmarks.

“MTDS, Budgets and Recent Cabinet Resolutions) all lack actual target by which domestic arrears will be reduced, debt accumulation will be slowed down” Mr. Chizonde stated.
However, the Centre had noted the need for Zambia to seek for an IMF Programme before refinancing its Eurobonds
Mr. Chizonde said Zambia should reduce her total debt stock to less than 60% of Gross Domestic Product (GDP) and reduce domestic borrowing to avoid crowding the private sector.

Bright Chizonde

“CTPD has observed that the discussions around public debts in Zambia have focused on the extent of the problem and its impacts on macroeconomic stability and service delivery. There has been limited focus on identifying possible solutions to mitigate this current debt situation. One such solution is debt restructuring which has the potential to reduce debt service payments in order to free up more resources for public service delivery. It is therefore imperative to investigate possible solutions to Zambia’s growing public debt in order to restore macroeconomic stability and debt sustainability,” Mr. Chizonde noted.
He said there was urgent need for Zambia to improve its debt management through improved transparency and developing a sound debt management strategy which incorporates the Debt Sustainability Analysis (DSA).
“Zambia should urgently seek an IMF program in order to restore investor confidence. The policy inconsistency and failure to properly implement self-developed austerity measures has greatly eroded investor confidence. There is therefore need to improve Zambia’s credit rating before embarking on debt restructuring in order to reduce the cost of the venture,” he said.
Mr. Chizonde stated that the country’s Eurobonds should be refinanced in order to reduce external debt service payments, coupled with the setting up of the sinking fund with propelled legal provisions for fund allocation and use.
“Domestic debt and domestic arrears should be reduced. The dual are limiting the growth of the private sector-Zambia needs improved economic activity in order to generate more taxes in the future,” he said.
Mr Chizonde added that Zambia should renegotiate Chinese Loans and consider entering into Public Private Partnerships (PPPs) with Chinese companies on strategic projects in order to reduce further accumulation of debt.
“There is need for increased transparency on the contraction of Chinese Loans and to limit financing to strategic projects” Mr. Chizonde said.
The CTPD urged Government to improve its debt management with respect to Reporting of Debt information, Perspective of Debt Distress and Debt management strategy

“The Debt values are considered to be understated, it is believed total debt, inclusive of publicly guaranteed debt and domestic arrears may be as high as $20.8 billion (IMF, 2019). The use of this technical definition has been flawed since it has not been applied when other things are held constant. Government should broaden its understanding of distress to include local obligations such as arrears and salaries,” he explained.
And Renowned Zambia’s Economist Oliver Saasa observed that Zambia is currently in a Debt Distress, saying if not careful and certain measures are not put in place, the country would start heading towards a Debt Crisis if the Government will not put.
“If we are to ask if Zambia needs an IMF Package, the answer is in the ‘affirmative’. To say if Zambia is in a debt crisis, the answer is a big no but we are heading towards a debt crisis at very high speed if certain measures are not put in place,” Prof. Saasa noted.