External Debt Reaches US$11.2 billion

Minister of Finance Bwalya Ngandu has this week confirmed that external debt stock continues to rise and now stands at US$11.2 billion.

The debt has increased by almost 10% in the past six months, having stood at US$10.2 billion in June 2019 and just US$1.9 billion in 2011. According to the Minister the latest increase comes as a result of new disbursements on existing loans mostly earmarked for infrastructure development.

Domestic arrears stood at K26.2 billion in September 2019 and concern remains regarding Zambia’s high levels of debt, which reached 80% of GDP by the end of 2019 as compared with 35% in 2014.

Organizations such as the African Development Bank have warned that the country is at high risk of debt distress and the Economics Association of Zambia President Lubinda Haabazoka has previously warned that servicing the debt would cost around US$800 million in 2019.

However the Minister confirmed that Government still intends to take steps to slow the growth of future debt, including a moratorium on the contraction of external project loans, the cancellation of selected external project loans and the re-scoping of selected externally finance projects to bring down costs.

As it stand the Government is reviewing the legal implications of undertaking a debt re-profiling exercise, according to the Minister.

Dr Ngandu also spoke about the challenges of 2019, which saw GDP growth revised down from 4% to 2%. The Minister pointed to ‘adverse weather conditions, agricultural output and electricity generation’ as being among the challenges. 

He projected a growth rate of 3% for 2020 and the medium term, but noted that risks to the projection include “climate change, particularly in the agricultural and energy sectors, ineffective implementation of fiscal consolidation measures and uncertainty in the global economy.”