Why debt concerns you: High impact on social spending

In our last column we outlined Zambia’s alarming debt position and explained how it came about. As we continue our series one particular cause for concern that we want to highlight is that increased debt has seen higher interest payments consume a large component of our national budget in 2018. As a result, less funds are available to spend on initiatives that help reduce poverty or support job creation in the country.

The amount spent on debt servicing which includes interest payments as well as payments towards reducing the actual amount borrowed has increased significantly since last year. According to the Zambia Institute for Policy Analysis and Research (ZIPAR), the Government spent K9.1 billion on debt servicing for the first half of 2018, which was more than planned the budgeted amount of K6.2 billion. This K9.1 billion on debt servicing for the first half of 2018 is almost equivalent to the entire amount spent on debt servicing payments for the year 2017 which amounted to K9.8 billion.

During the first six months of 2018 personal emoluments, that is, wages and salaries, accounted for 42% of domestic revenues, while 29% accounted for interest payments. As such, only 30% of government revenues was spent on all the remaining government programmes which drive the country’s development, such as health, education, social protection, agriculture and so on . The amount spent on debt servicing is only expected to increase in the coming years. As we have seen in last week’s budget speech, the amount Zambia is paying for debt servicing is still increasing as the available budget for social services is decreasing. In this year’s budget external debt servicing costs doubled from K7.2 billion in 2018 to K14.9 billion in 2019.

A look at the current situation on the ground on the status of public services and poverty reduction initiatives in Zambia shows that there is urgent need to ring-fence money, that is, to guarantee that funds allocated for a poverty reduction initiatives will not be spent on anything else in order to protect the poorest and most vulnerable in society. An analysis carried out by the Civil Society for Poverty Reduction (CSPR) in five provinces namely Eastern Province, Luapula, North-Western, Southern Province and Western Province on the quality of social sector services highlights a number of challenges that show that the quality of service delivery in these provinces has been deteriorating.

Education provision is suffering from a lack of funding. The teacher to pupil ratio has remained high with an average ratio of 1 teacher to 60 pupils and there is limited access to teaching aids and support infrastructure such as desks. The health sector is under-resourced, with most rural health centres and clinics not having medical doctors and support staff such as pharmacy technologists, lab technicians and midwives. Also, support for farmers has fallen due to a lack of extension officers: the ratio of these officers to farmers is as high as 1 to 1200 in some areas, three times the ideal of 1 to 400. This lack of investment is hindering Zambia’s development as the country needs a well-educated, healthy and productive population to prosper.

In an effort to gain a perspective on the ground CUTS conducted an interview with Mr Alick Muleya, Council Chairman of Sinazongwe District, Southern Province. He expressed how the lack of quality public services has left his district under-developed. The district has 13 health posts of which only 6 are functioning: the remaining 7 are not operational due to lack of funds to pay health workers and staff houses to accommodate them. He also noted that 32 schools in the district did not have electricity and other essential infrastructure resulting in students having to sit on bricks because there are no desks or chairs.

With high levels of government spending going towards debt servicing, less money is left to improve the quality of public services. Further to this, the government is already struggling to fund key budgeted activities due to the need to redirect resources to debt repayment. For instance, it was reported by ZIPAR that only 27% of the funding for the Social Cash Transfer Scheme Pension Fund was released in the first half of 2018. Additionally, no funding has been released for the Food Security Pack initiative and other empowerment programmes this year. Not only are the budgets for development programmes small, they are not being spent, as debt levels squeeze spending.

High debt levels should concern all of us as no one is immune to its impacts. There is need to recognise the importance of social spending for us all as citizens and for the country as whole. Good quality education and proper health care are necessary to build a productive workforce that can help develop the country and lift people out of poverty. The impact of the cost of servicing the country’s debt is reducing social spending, which will negatively impact us all, especially the poorest in society. There is therefore need to recognise the importance of social spending and ring-fence it from cuts to protect the poorest in society and drive the country’s development.

Continue to follow the series for the next coming weeks and follow the conversation on social media #DebtConcernsMe.
Facebook – Consumer Unity Trust Society – CUTS Lusaka
Twitter – @CUTS_Lusaka
For more information contact: The Centre Coordinator, Consumer Unity and Trust Society, 298 Ngwerere Road, Roma, Lusaka. Email:lusaka@cuts.org. Phone 097 8055 293

         

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