‘Zambia’s debt sustainable’
Published On April 6, 2014 » 2007 Views» By Moses Kabaila Jr: Online Editor » Business, Stories
 0 stars
Register to vote!

By JAMES MUYANWA and JUDITH NAMUTOWE-
ZAMBIA’s current debt stock is sustainable but there is cause to worry because it may become unsustainable in the next two years, local  economic experts have said.
Speakers at Economics Association of Zambia (EAZ)-organised public discussion said that the current total debts of about US$7.2 billion were still sustainable but were becoming a source of worry.
In his presentation, Zambia Institute for Policy Analysis and Research (ZIPAR) research fellow Shebo Nalishebo said the total public debt, both  domestic and external of US$7.2 billion translates into 30 per cent of the country’s Gross Domestic Product (GDP).
The figure is still below the threshold of 40 per cent of the GDP above which the debt repayment becomes unsustainable.
Discussing the topic: “Zambia’s rising debt: Should we worry,” Mr  Nalishebo said the debt-to-GDP ratio of 40 per cent was the suggested  sustainable threshold for developing and emerging economies.
He said given the prevailing economic condition in Zambia and Zambia’s economic status of lower middle income country, the debt situation could go beyond sustainable levels by 2018.
Zambia’s attainment of the lower middle income country status entails that there is less concessional loans available for it.
Mr Nalishebo said experts predict that if the current trend was not checked the debt-to-GDP ratio could reach 50 per cent by 2018 which would be beyond the 40-per cent threshold.
He said that level of debts would become unsustainable and hence the cause for worry.
Apart from the financing gaps, the need for debt contraction is being compounded by the seeming feeble tax morality among the citizens.
He said that the weak tax morality lead to low collection of revenue by Zambia Revenue Authority (ZRA) from the business community and individuals.
“Faced with the constraints of collecting adequate tax revenue, government may just resort to borrowing from the domestic market rather than enhancing their tax mobilisation efforts.” he said
Jesuit Centre for Theological Reflection (JCTR) official Musonda Kabinga  said high debt levels implied high debt servicing amounts which if not well  managed could lead to serious consequences.
Mr Kabinga, who is a programme officer, said borrowing should take into account the country’s capacity to pay without affecting the delivery of  essential services to the public.
He said on average, the country pays millions of dollars per year in debts which were colossal amounts.
And International Monetary Fund (IMF) Country Representative, Tobias Rasmussen said there was need for the country to balance consideration of
long-term development needs with fiscal space.
He advised that it was important to ensure careful investment selection to get high returns, plan ahead and identify risks.

Share this post
Tags