The Mast Online, September 02, 2019
PREMIER Consult Limited managing director Professor Oliver Saasa says Zambia is avoiding defaulting on its debts by ‘sacrificing’ social sector spending.
Meanwhile, Consumer Unity and Trust Society (CUTS) International coordinator Chenai Mukumba has reiterated that debt servicing is now taking a significant portion of the country’s national budget.
Speaking at public debt symposium organised by African Forum on Debt and Development (AFRODAD) and CUTS International at Taj Pamodzi Hotel in Lusaka on Friday, Prof Saasa indicated that debt contraction itself was not bad.
“But you can only borrow to the extent that you are able to service the debt. In other words, you must align your appetite to contract sovereign debt to your ability to settle your ability when it falls due. That’s where the challenge is,” Prof Saasa noted.
“If you look at the challenge in the Zambian case, essentially how we are dodging relapsing into debt distress…. We have not defaulted, by the way! But we are avoiding defaulting by eating into social sector spending. We’ve just re-aligned budget….”
He explained that those who refuse the narrative that Zambia was in a debt distress because the country is able to meet external obligations when they fall due should at least agree that Zambia is economically stressed.
“Human development index that defines social welfare, ultimately, is what you should focus upon if you want to determine whether or not you are doing very efficiently the wrong things,” he said.
Prof Saasa also spoke to Zambia’s per capita debt.
“We are about 18 million as Zambian people – I don’t know the figures now. At the moment, public debt is in the region of $15 billion. That is when you combine the external and domestic debts,” noted Prof Saasa.
“If you make simple arithmetic, you’ll see that on average we have a per capita debt of about $833, meaning that every Zambian, per head, you put $833. That is a challenge that one has to start reflecting [on that] to what extent are we doing the right things.”
Meanwhile, Mukumba said in sub-Saharan Africa, public debt had continued to rise, resulting in elevated public debt vulnerabilities.
She noted that despite economic growth that had been seen on the continent of over three per cent, according to the IMF, 16 sub-Saharan African countries were classified as having either a high risk of debt distress or being in debt distress.
“Zambia is one of the seven African countries facing risks of high debt distress. In 2017, the IMF Debt Sustainability Analysis shifted Zambia from moderate to high risk of debt distress,” Mukumba said.
“This indicates that as a country, we have been accumulating much debt over a very short period of time and a much more sustainable pace was required. Currently, our debt levels are at over 70 per cent with a large portion of Zambia’s external debt consisting of our three Euro bonds totalling US$3 billion.”
She added that Zambia’s indebtedness had been: “a cause of concern to not only local stakeholders but also to multilateral institutions such as the World Bank and the IMF.”
“As a result of Zambia’s increasing debt, our interest payments on total public debt have increased from less one per cent of domestic revenue in 2011 to 27 per cent of domestic revenues in 2017. As such, debt serving is now taking a significant portion of the national budget,” noted Mukumba.
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