Africa-Press – Zambia. Public Debt in Zambia is a growing problem, perhaps the most pressing economic challenge that the country faces. Domestic debt currently stands at K61.9 billion and external debt at $12 billion, and these figures continue to increase. Years of borrowing on short-term plans with little return on investment has left Zambia with little means to repay its debts – in 2017 interest payments alone cost Zambia K9.8 billion.
High debt weakens the Zambian economy, slowing growth. As money is spent on debt servicing payments, investment in other areas such as skills, research and development and infrastructure projects fall. High debt also limits the Government’s ability to respond to economic shocks such as a fall in the copper price, failing rains or currency depreciation.
Without urgent action from the government to address the high debt problem, the Zambian economy is at risk of toppling into an economic crisis; inflation could increase as the kwacha depreciates, businesses turnover and profits will fall, and jobs will be lost as new wealth is created at a slower rate. However, with a New Dawn Government, this inevitable decline has been halted for the time being.
This debt crisis directly and significantly affects Zambia’s businesses, large and small. The business community are a key stakeholder in the debt crisis, and an influential voice in the debate.
The above factors were also present in the case of Ghana in 2015. The transformation of Ghana’s economy and society was anchored on the Ghana Shared Growth and Development Agenda (GSGDA) II, 2014-2017 – Vol I: Policy Framework. This was the platform for development. It provided a consistent set of policy objectives and strategies to guide the preparation and implementation of medium-term and annual development plans and budgets at sector and district levels. It also served as a platform for donor coordination (something that Zambia has lost in the last ten years of PF rule). Consequently, the medium-term priority policies were anchored in the following thematic areas:
Ghana’s economy was in trouble, hobbled by widening current account and budget deficits, rampant inflation, and a depreciating currency. Credit dried up as interest rates rose and banks’ bad loans piled up. At the root of Ghana’s woes was out-of-control government spending, largely to pay salaries of an overgrown civil service.
In early 2015, Ghana turned to the IMF for a $918 million loan to help stabilize the economy. IMF advisors, working with the Ghanaian government, developed a three-part program:
Ghana’s economy is on the mend. The trade and budget deficits are narrowing. The pace of economic growth rose to above 8 percent in 2019 onwards from 2.2 percent in 2015. The inflation rate fell to 8 percent from almost 19 percent. Cuts to wasteful spending made room for much needed social services, such as free secondary education. For Ghana’s 28 million people, it all adds up to higher incomes, better job opportunities, and more purchasing power.
The first step would be to convene a small team of no more than seven to nine people to begin the work of putting together a debt management strategy and negotiating framework using the Medium-Term Framework approved by Cabinet. This task team should comprise eminent Zambian technocrats that have the experience and knowledge. For instance, Dr. Caleb Fundanga, Prof. Oliver Saasa, representative from ZIPAR, representative from ZICA and the Bankers Association. This task team would report to the Minister of Finance that would then report to you. The task team should also include as Observers your Economic and Legal Advisors.
This roundtable should occur once the private sector is properly aligned in terms of the key issues, they would want the Government to act upon. At this stage those business leaders with strong networks and relationships with Government would need to be in frontline in terms of moving the discussions forward. All the main sector business associations and professional associations should be involved in this roundtable discussion.
Mr. President, the experience of other countries suggests that Zambia’s ambition is achievable. Between 1990 and 2013, about 40 countries across the world have achieved average growth in real per capita GDP of 5 percent or more (at purchasing power parity).
International experience suggests that Zambia can be even more ambitious and lift its growth rate to 7 percent in the medium term, driven by domestic reforms and foreign investment–generated exports. Although not all countries succeeded in all reforms, countries that Zambia could emulate include India, Guyana, Vietnam, and Sri Lanka. African “lion” emerging economies, such as Cape Verde, Ghana, Mauritius, and Uganda, have also begun the journey already traveled by Asian “tiger” economies to move from low-income to middle-income emerging market status. With resolve, discipline, and a strong team it can be done.
Submitted in National Interest
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