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Zambia’s Mounting Debt Should Not Be Ignored

Zambia’s Mounting Debt Should Not Be Ignored

By Chama Bowa Mundia – Social and Economic Development (SED) Programme Manager at JCTR.

On Friday 11th September, 2020, the Republican President made the much awaited State of the Nation Address (SONA) during the official opening ceremony of the 5th session of the 12th National Assembly. The speech was dubbed “Dedication, Resilience and Innovation: Pursuing Economic Recovery for the Zambia we want”. In his address, the President highlighted the socio-economic challenges that the country continues to face and set the policy direction over the coming months for the nation.

The Jesuit Centre for Theological Reflection (JCTR) is however, disappointed that Zambia’s policy priorities over the coming months as set out in the SONA completely ignore debt with no mention of both the levels of debt and how they will be addressed. Undoubtedly, debt remains one of the gravest problems Zambia faces. While we acknowledge that climate change, falling commodity prices on the international market, and most recently, the disruption on lives and livelihoods caused by the COVID-19 pandemic pause significant challenges, debt is the elephant in the room. But yet again, Government appears to be kicking the can down the road when it comes to debt.

Evidently, Zambia’s fiscal deficit as a percentage of GDP has been on the increase since 2011 moving from -1.8% to -6%. This is significantly above the average Sub-Saharan African deficit levels in the same period. The country continues to increase expenditure at the backdrop of reduced revenues. Additionally, public debt as a percentage of GDP has been on the rise from 21% in 2011 to over 100% in 2020, again way above Sub-Saharan African average levels. The result: more debt to fill the fiscal deficit. The nation’s public debt has between 2011 to date increased at an alarming rate with external debt rising from US$3.2 billion in 2011 to US$11 billion as at the end of December 2019. Sadly, current debt levels surpass pre-HIPC (Highly Indebted Poor Countries) levels that were estimated at about US$7billion.Zambia’s Mounting Debt Should Not Be Ignored
The JCTR therefore makes a clarion call for government to not ignore debt. Ignoring the mounting debt challenge will not address this problem. Pursuing economic recovery for the Zambia we want without addressing debt is a pipe dream. Dedication, resilience and innovation are what is needed in our war against debt now more than ever. For one, according to the Ministry of Finance, in the wake of COVID-19, total revenue collections for the first half of 2020 (January to June 2020) were 5.1% below target due to the involuntary scaling down of productive activities across all economic sectors. With dwindling revenues and rising interest payments (given the depreciation of the local currency), debt MUST be addressed.

Without addressing debt, funding to essential sectors such as education, health, and social protection will remain a challenge as financial resources will be channelled towards public debt servicing. Without funding to essential sectors, attaining considerable levels of human dignity for the Zambian people will remain elusive. JCTR therefore urges the Government to make prudent decisions now before a full blown debt crisis erupts as payback time particularly for the Eurobonds nears. The JCTR wishes to remind the Government that the Eurobonds pay back falls due in 2022, 2024 and 2025. There is therefore, need to catch the bull by the horn and put in place measures to address the national debt crisis.