GOVERNMENT must strictly manage its debt contraction policy to ensure the 2021 national budget delivers on its intended objectives of ensuring Zambia’s economic recovery plan is achieved, says the Zambia Chamber of Commerce and Industry (ZACCI).

Commenting on the 2021 national budget debt servicing allocation and its impact on Zambia’s economic recovery prospects, ZACCI president Dr Chabuka Kawesha said there was need for government to manage its debt contraction policy to ensure next year’s budget helped Zambia attain full economic recovery.

Data from the 2021 budget shows that K27 billion will be due to be spent servicing Zambia’s external debt alone, up from this year’s K21.1 billion allocation, representing 23 per cent of the total budget amount.

Domestic debt servicing has equally increased to K18.3 billion next year, up from K12.6 billion allocated in this year’s budget.

Next year’s K119.6 billion budget represents an increase from this year’s K106 billion, and is intended to be partly financed by domestic borrowing amounting to K17.4 billion and K34.2 billion emanating from external resources, representing 14.5 and 28.6 per cent of the total budget, respectively.

“Debt servicing has got its silver lining so to say in that the category or status in which we are with regard to both external and local debt has an impact on investor confidence. So, it’s an area that we want managed as quickly as possible. The private sector, of course, will not just lean back and allow all resources to be channelled into debt servicing; we want them to be channelled, even as incentives into the private sector. But we understand the phase we are in, and the indication that the budget is output-based is one comfort area in that there are parameters and benchmarks to what can be done within the K119.6 billion budget,” Dr Kawesha said in an interview.

Asked if the increased exemption threshold for Pay-As-You-Earn (PAYE) to K4,000 from current K3,300 per month would spur local economic growth, he expressed optimism in view of projected higher disposable incomes.

“Yes, it will increase individual spend for those in employment, but we need to control the fast increase in prices of goods and services within our market then we are going to see a true realisation of that intention,” he replied.

Meanwhile, Dr Kawesha called for strong implementation of policy and regulatory reforms to ensure the private sector took a leading role in various sectors of the economy to revive growth.

“The major element was the issue of policy and regulatory reforms. It is our hope that as government undertakes this objective of policy and regulatory reform, the ultimate output of this would be full liberalisation. We should not limit our desire to fully liberalise across sectors, whether it’s agriculture, energy, health and all that so that we allow the private sector to take a lead in there,” said Dr Kawesha.

“Similarly, even as we speak to sectors, like the road sector, we’ve got the tolling policy, which has been implemented…allow the private sector to start building these roads; ease the access of the private sector into the economic zones. We believe the US $100,000 (investment requirement amount) is still on the high side and for locals, it should have basically been scrapped off so that it works as a real incentive, not as a short-gap measure, and allow locals to use that capital as part of their manufacturing or food processing set-ups. So, yes, the (2021) budget has opened up a lot of areas; we know it’s a recovery budget; we know the harsh season that we are in that has been ignited by COVID-19. So, let’s ensure that whatever objectives the (Finance) Minister has set in there, the implementation to achieve industrialisation, to achieve growth, see more investors in the energy, petroleum, tourism sectors, are implemented.”