Zambia has been facing unsustainable debt since the International Monetary Fund (IMF) declared Zambia at high risk of debt distress in 2019. Therefore, on 16th July 2020, ZAM gave a presentation on the private sector concerns of growing public debt at a meeting organised by the Consumer Unity and Trust Society (CUTS) with the IMF as part of the Civil Society Organisations (CSO) Debt Alliance. The presentation outlined how the burgeoning Zambian dept was affecting private sector players through various channels.
ZAM CEO Ms Florence Muleya discussed the trend of both public domestic and external debt from 2010 to 2019 showing that external public debt has increased exponentially between 2015 and 2019. But as debt had been increasing it was happening with real GDP growth reducing. Some of the channels that the growing debt could possibly affect and were being felt in the economy and the manufacturing sector were a rapid rate of price increases – inflation; crowding out effects with government borrowing more from the domestic market, macroeconomic instability with interest rates high, reduced liquidity to the private and depreciation of the kwacha.
ZAM observed that manufacturers and other private sector players were resorting to more of external debt with private external debt also on a sharp increase. To avoid dollar denominated debt, ZAM was of the view that the Development Bank of Zambia be given the custodianship of the medium term Covid 19 stimulus package to ensure lower interest rates because the high interests rates that are charged by commercial banks affected the utilisation of that financing facility and help improve liquidity in the market.
ZAM also recommended improved management of debt proceeds such as prioritising economic roads as opposed to social roads and prioritising investments with high economic yields.
