JCTR expresses concern over Zambia’s high debt
The Jesuit Centre for Theological Reflection (JCTR) says the recent World Bank report should not be misconstrued to mean borrowing has no limits.
Last Monday, the Zambia Daily Mail carried a headline titled “Borrowing is Beneficial”, citing the 2020 World Bank Global Prospects report without highlighting the risks that come with borrowing.
But JCTR Media and Information Officer Enock Ngoma, in a statement issued on Sunday, stated that the socio-economic distress from Zambia’s debt overhang is abundantly evident.
"These risks that the World Bank highlighted in its report are the major concerns of most critiques of Zambia’s borrowing, including JCTR. We therefore note with concern that such publicity has the potential to be detrimental to the calls for the prudent financial management of public resources. The JCTR wishes to therefore emphasise that the World Bank report should not be misconstrued to mean borrowing has no limits. Evidence both globally and domestically indicates that rising debt can be detrimental to the national economy," Ngoma stated.
"The socio-economic distress from Zambia’s debt overhang is abundantly evident. For example, analysis conducted in 2018 by the Zambia Institute for Policy Analysis and Research (ZIPAR) highlights how detrimental rising debt can be to the economy. In 2018, fiscal authorities spent K6.2 billion as external debt interest payment due to the huge external debt and the resultant increase in debt service obligations. Most notable is that this was 49 percent or K2.0 billion over-budget. The effect of this was seen when three socially oriented programmes – Social Benefits (pensions, social cash transfer and so on), Strategic Food Reserve, and Water and Sanitation experienced a combined 66 percent (or K2.0 billion) budget cut."
He noted that JCTR is concerned that the external debt may compromise food security.
"JCTR is concerned that because external debt service default comes with onerous consequences, the country chose to 1) compromise its food security position and 2) further marginalise the poor and vulnerable people. Therefore, while it is true that external debt (given certain prerequisites) is critical in financing growth-enhancing investments such as infrastructure, health care and education, it is however also evident that excessive accumulation of debt holds potential for adverse economic and social consequences. It is for this reason that the 2020 World Bank Global Prospects report highlights the need for strong regulatory and supervisory regimes, good corporate governance and improved debt transparency and debt management among others at the backdrop of every country’s debt management efforts," Ngoma stated.