Government’s continued borrowing from the domestic market has maintained limited funding available for the private sector, says the Centre for Trade Policy and Development (CTPD).
And Chizonde has called on government to implement real austerity measures to reduce the country’s fiscal deficit to ensure that there are enough funds to meet its debt obligations.
Speaking when he addressed journalists in Lusaka, CTPD researcher Bright Chizonde said government should quickly reduce how much it borrowed from the domestic market to reduce lower interest rates on credit facilities, which currently remain above at a nominal average of 25.4 per cent.
Zambia’s domestic debt has jumped to an unprecedented K60.3 billion by June 30, 2019, compared to K58.3 billion as at March 31, 2019, while the government’s arrears owed to contractors and suppliers swelled to K16.7 billion from K15.6 billion as at as end March, 2019, up from K15.6 billion as at December, 2018.
“The government should just reduce how much it borrows from the domestic markets to reduce interest rates and then we can end up having a private sector-driven economy. Government should not be the centre or the force behind the economy; it’s the private sector because we know the private sector is more efficient in terms of investment projects,” Chizonde said.
“We gave recommendations with respect with what government should do in order to have a private sector-driven economy and we need to reduce the domestic interest rates and to do this, a number of things have to be done, and chief among them is the government needs to reduce borrowing on the domestic market. Government should just reduce its borrowing so that it leave some funds for the private sector. Private sector is also suffering from liquidity challenges because of increased domestic arrears. We also recommend that government dismantles the domestic arrears in order for the private sector to have more funds.”
And Chizonde, who is also a lecturer at the University of Zambia (UNZA), called on government to implement real austerity measures to reduce the fiscal deficit to ensure the country had enough resources to meet its debt obligations.
“And then, the issue of austerity measures should be real; government needs to implement real austerity measures to reduce the (fiscal) deficit so as to make sure that we have more resources to meet the remaining interest payments even after refinancing. On austerity measures, I think most of the times we see different purchases that government would make; maybe government has bought a new fire tender; a new ambulance they might have bought, and people need to react. If you want to see real austerity measures being implemented, you need to react,” Chizonde noted.
“I think Zambians, we have this tendency of being swayed from something that is very important by something else very quickly. In that, maybe, something has happened, which is a very serious public finance issue where government has bought something that is exorbitant by many accounts and experts, but then we can raise that issue for a week or so and it just dies a natural death! So, we need to constantly probe on all these things so that government knows that there will be checks and balances even from people in the media and other civil society organisations if they do not implement their own initiated austerity measures.”
Meanwhile, Chizonde reiterated the need for transparency on the country’s debt.
“We need to be involved in making sure that we see actual prudent financial management. I think what can be done first of all is to create alarm. If you are aware, a few years ago, nobody was even talking about how much debt the country has accumulated, it was a bit silent, the debt was increasing, but it wasn’t in the public domain as it is now. Different civil society organisations have actually championed and pushed this agenda to be where it is now. CSOs need to go out there; media need to explain the extent of this debt situation. We need go to the public domain and then push for transparency, how much debt do we have; always looking at the figures and always asking government for current figures and provide current statistics on how much debt we have,” urged Chizonde.