Zambia Airways will add to Debt Sustainability

The Center for Trade Policy and Development recently concluded a follow-up study on government’s decision to relaunch Zambia Airways. Through an assessment of the proposed business model for Zambia Airways and an analysis of the financing options for the airline, it has been established that the relaunch of Zambia Airways will add to the unsustainability of Zambia’s Public debt.

Our recent meeting with the staff of the International Monetary Fund (IMF) as Civil Society Organization revealed that the IMF will not initiate talks on a possible program with Zambia as long as debt remains unsustainable.

CTPD Researcher Bright Chizonde is calling on government to halt this decision since the current macroeconomic and fiscal position is not allowing for the relaunch of Zambia Airways.

‘’Government should instead harness the potential of the private sector through policy interventions in order to improve Zambia’s connectivity to the rest of the world. The relaunch of Zambia Airways, seems to be of high priority since government has continued its plans amid economic and fiscal limitations,’’ He said.

Mr Chizonde noted that Government’s non-discretionary expenditure, which comprises personnel emoluments and debt servicing, is currently at 50.1% and 40% respectively, giving a total of 90.1% of the annual budget as of 2019.

He stressed that this leaves the discretionary expenditure amount of about 9.9% of the annual budget.

“The rapid increase in debt serving is due to the pace of debt accumulation. In 2018 alone new loans amounted to US$ 2.6 million, compared to US$ 1.75 billion contracted in 2017. Since Zambia Airways may require financing through domestic tax revenue or debt financing, the relaunch of the airline will result in increased fiscal challenges,especially in the likely event of airline failure’, He added.

Mr. Chizonde said CTPD therefore urges the Zambia government to focus on implementing measures aimed at restoring debt sustainability.

He added: it is no longer a debate that Zambia’s debt stock is negatively affecting macroeconomic stability, government budgeting and the ability of government to deliver critical social services such as health and education.

‘’Taking on more public investment, over and above the US$ 1 billion spent on upgrading airport infrastructure, through launching a national airline is excessive in the current environment’’, Mr. Chizonde noted.

Mr. Chizonde said there is need for serious austerity and fiscal consolidation if Zambia is to achieve debt sustainability.