Fiscal indiscipline undermining Zambia’s economy- CTPD
By Staff Reporter
The Center for Trade Policy and Development (CTPD) says rapid debt accumulation and fiscal indiscipline continue to undermine Zambia’s economy.
CTPD researcher Bright Chizonde said poor debt management, limited transparency in reporting debt statistics, political economy overrides, legal shortcomings, and fiscal indiscipline continue to undermine Zambia’s economic performance.
Chizonde said Zambia’s economic growth had slowed down with foreign reserves rapidly depleting while interest rates remain high-limiting the growth of the private sector.
He said that even in the wake of increased taxation, the government’s liquidity position had 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”, he said.
He stated that it was of major concern 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.
“The rapid increase in public debt and debt servicing has resulted in reduced budget allocations toward education, health and social protection,” he said
He noted that the Zambian government’s drive for rapid infrastructure development had been a classic case of a failure to “cut your coat according to your cloth”, as some experts’ assert.
Chizonde said Government needed 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 had 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”, he said.
He has urged government to move to cash budgeting and spend according to the domestic resources envelop.