By HELEN ZULU –
ZAMBIA’S public debt is projected to exceed the benchmark level of 56 per cent of Gross Domestic Product (GDP).
The country’s external debt currently stands at US$7.6 billion while domestic debt is at US$4.5 billion as at October 2017.
Zambia Institute for Policy Analysis (ZIPAR) research fellow, public finance Shebo Nalishebo, warned that without reform, total public debt was projected to exceed the benchmark level of 56 percent of GDP associated with heightened vulnerabilities for medium performers.
Mr Nalishebo noted that public debt had been rising at an unsustainable pace and Zambia was now at high risk of debt distress.
He said this during the International Monetary Fund (IMF) Sub Saharan regional economic outlook for October 2017 in Lusaka yesterday.
“Fiscal adjustment is needed to stave off an imminent crisis such as the one experienced in 2015.
“Static revenues and unsustainable public spending such as interest payments, inefficient public investments, and subsidies take up an increasing high share of the budget contributed to the high fiscal deficit,” he said.
Finance permanent Secretary Mukuli Chikuba said Government had put in place measures aimed at reducing the fiscal deficit to around three per cent of GDP by 2020.
Mr Chikuba said the fiscal deficit was expected to reduce over the medium term with fiscal prudence given the new laws that would plug expenditure leakages.
He said this would create room for reduced borrowing and expenditure to support the economy.
Mr. Chikuba explained that the measures would also slow down the pace of borrowing through suspension of non-concessional borrowing.
“A new debt strategy that aims to reposition debt has been put in place and published. As mentioned the law is being revised to ensure enshrinement in law of the commitment of the Government to have borrowing undertaken transparently,” Mr. Chikuba said.
He also said arrears were expected to be halted and fall into 2019.
IMF resident representative, Alfredo Balding, also warned that at the pace at which the public debt was rising, it risked shooting up towards 90 per cent of the GDP over the next years if not tackled adequately.
“With absent reforms, the outlook for Zambia’s public debt will be difficult. Zambia needs to tackle fiscal consolidation more and more,” he said.
Dr. Balding also observed that the current direction of policies was one that imperils the hard won development gains of recent years and that there was need to broaden the tax base and strengthen export diversification by expanding along the value chain.He also said growth in the Sub-Saharan Africa for this year was projected to be at 2.6 per cent and 3.4 per cent next year from 1.4 per cent recorded last year.
“Zambia has a moderate rebound although the growth remains subdued. Exchange rate pressures have eased. There is a lot of work to be done in Zambia on fiscal deficit,” Dr. Balding said.