ZIPAR says debt is a big challenge in Zambia
By Staff Reporter
Zambia Institute for Policy Analysis and Research says issue of debt is a big challenge currently for Zambia.
Speaking at a Zanaco mid-year economic review panel discussion at Sarovar Hotel on Tuesday evening, Zambia Institute for Policy Analysis and Research (ZIPAR) director Dr Pamela Kabaso observed that all budget lines were negative – except servicing debt as well as expenditure on roads.
She said foreign currency reserves had fallen to a level where the central bank did not have so much leeway to intervene in the market in terms of cushioning fluctuations.
“The issue of debt is a big challenge currently because if you look at fiscal performance for quarter one, you’ll see that all budget lines were negative – except servicing debt as well as expenditure on roads,” Dr Kabaso said.
“So, which means most of our resources are going to servicing debt and it has implications, of course, on the exchange rate. The external debt, of course, has to be paid off in foreign currency and you have also heard [that] our foreign currency reserves have fallen.”
Dr Kabaso noted that ZIPAR had been providing some advice to the government regarding dealing with debt.
She indicated that the first recommendation was that government needed to slow down on borrowing, especially expensive debt.
She indicated that the first recommendation was that government needed to slow down on borrowing, especially expensive debt.
“Basically, when you are in a hole, if you have to get out, you have to stop digging. Secondly, it’s to try and re-structure some of the debts because the biggest problem which is there is mismatch in maturity,” Dr Kabaso noted.
“We have debt which we contracted, for instance, infrastructure debt perhaps to build an airport or a road. But now maybe that airport has not completed or it has not started to bring any return but that debt is due and has to be paid.”
Dr Kabaso emphasised that ZIPAR recommended that government needed to negotiate to try and re-structure the maturities on some of the country’s debts so that it could ease off the burden.
“We have also talked of the IMF – this has been for a long time in the news. As ZIPAR, we have been on record to recommend government to get that package because it will ease off the balance of payment challenges that we are facing, which will help in servicing the debt when it falls due. We need to get on an IMF programme and get a bailout; it’s very key and it’s very essential,” said Dr Kabaso.
Zanaco head of economic research Dr Patrick Chileshe said: “What we’ve seen in Zambia is that the economy has continued to contract in the first half of 2019.”
“Actually, the economic indicators for May are that the Zambian economic activity, especially the private sector, reached its lowest point in the month of April at 43.7,” Dr Chileshe said.
“The key factors that are negatively affecting growth include tight liquidity conditions, high uncertainty surrounding certain policies and one of them is the sales tax. We are still not yet very sure whether it will go ahead next week or it might be suspended.”
He pointed out that businesses were not yet: “very sure of whether they can plan for sales tax and that is negatively impacting their business operations…..”
Earlier, Dr Chileshe highlighted that global economic growth was under strain and that there was a serious slowdown causing credit growth to be subdued, among other things.
Zambia Chamber of Commerce and Industry (ZACCI) chief executive officer Prisca Chikwashi said: “we need more investment in power generation and we need a mix; we’ve been relying more on hydro electricity.”
