Economist Chibamba Kanyama says Zambia is not doing enough in terms of reducing arrears and debt will keep on rising until government starts clearing the principle amounts in 2022.
In an interview, Kanyama said Zambia’s external debt kept rising because government was only paying interest rates at the moment.
“It’s obvious that the debt is increasing both external [and domestic] and we are not doing much in terms of reducing the arrears. So both sides are building up and we still feel it will increase again maybe by another, I am just guessing, but maybe by another 300 million or so by virtue of the ongoing works because there are projects that have been contracted by government but not yet funded, in terms of disbursement of full funds. But as the Chinese contractors and Chinese Exim Bank releases those monies for those projects like the airport construction, that money gets captured now as external debt and that is why you are seeing that the external debt is increasing,” Kanyama said.
“And the most worrying [thing] is that despite huge repayment like last year we made over US $700 million in repayment but the debt is increasing, a person will ask, why aren’t we seeing significant reduction if we are paying every given time, [talking about] debt servicing, we are not really paying the principle, all we are paying are interest rates and as long as we are paying the interest rates and not the principle, the debt will keep on rising and there will not be any much reduction in debt as long as we are not yet paying the principle. The principle begins to be paid in 2022,” Kanyama said.
Kanyama said the rising debt was putting pressure on the Treasury, thus affecting funding to the country’s areas of need.
“So the impact as you know is that government is spending much of its resources now servicing debt, giving a lot of pressure on the Treasury on financing all other needs of the country is even affecting local debt dismantling. Much more worrying though is that even the treasury bills are under subscribed. We know that we are supposed to be servicing maturing investments very soon and are told that there was an under-subscription even for this particular period. So we have to find money to service the debt. So the pressure is very visible, it’s very evident. I am very confident that government is not sleeping over this, government is working everyday to see how best they can manage,” said Kanyama.