By Scoop Reporter
HIGH public debt levels are still a major economic challenge for Zambia resulting in the Government struggling to raise sufficient resources for development needs, Consumer Unity and Trust Society (CUTS)-Zambia has said.
In a statement today, CUTS programmes officer, Kangwa Muyunda, says the COVID-19 pandemic has further intensified Zambia’s debt situation and has forced the Government to re-budget and to re-prioritize expenditures.
Ms. Muyunda says in re-prioritising the budget, Government must ensure that social sectors, such as health, social protection, and education are at the centre of its focus.
She has urged the Government to desist from placing resources into infrastructure and other non-essential spending saying the debt situation limits the Government’s capability to finance development projects such as the Sustainable Development Goals (SDGs) and that this makes it difficult for the country to achieve its development plans.
“The high debt levels have led to a deprecating Kwacha as most of the money is externalized due to high external debt servicing costs. This has left international investors skeptical, and credit rating agencies have downgraded Zambia’s sovereign credit rating.
“The depreciating Kwacha in turn has an impact on inflation as goods and services become more expensive therefore, increasing the cost of living and doing business for Zambians. Cognizant of the importance of taxes needed to domestically finance different projects, almost every year new taxes and fees are introduced squeezing consumers’ disposable income,” Ms. Muyunda said.
She says according to the International Monetary Fund (IMF) which recently concluded its virtual mission visit, the social and macroeconomic impact of the COVID-19 shock, on top of a severe drought last year, will be heavy.
She says growth is forecast at around 5 percent in 2020 and the number of people living in extreme poverty is expected to increase and that fiscal pressures in 2020 have increased due to significantly lower revenue collections and higher spending needs.
“The legal framework guiding debt management needs revision as it has gaps and weaknesses and is therefore, inadequate. Despite the increasing debt levels, there is a lack of transparency, accountability and participation in the management of debt which needs to be addressed.
“The law should require that the Government undertake prudent debt management given that debt default can lead to severe macroeconomic consequences. Clear debt management objectives to give a general policy direction are missing in the pieces of legislation and there is no guidance on the procedures of debt management including when and for what debt should be obtained,” she said.