The Consumer Unity Trust Society (CUTS) has observed the need for Zambia’s current legal framework to be considered for public debt management as the country grapples with ways to address Zambia’s growing debt burden.
Organization Programmes Office Kangwa Muyunda, told Money FM News, in a statement that while Zambia faces numerous development challenges that require financing, there is currently no legislation that mandates strategic planning through Debt Sustainability Analyses (DSAs) and Medium-Term Debt Strategies (MTDS) to avoid unplanned debt management.
Ms. Muyunda noted that the lack of publication of these two documents has been one of the contributors to Zambia’s high level of external debt which currently stands at US$11.3 billion and domestic debt at K80 billion has heightened the risk of debt distress.
“As Zambia faces numerous development challenges that require financing, there is currently no legislation that mandates strategic planning through Debt Sustainability Analyses (DSAs) and Medium-Term Debt Strategies (MTDS) to avoid unplanned debt management,” Ms Muyunda said.
“Lack of publication of these two documents has been one of the contributors to Zambia’s high level of external debt which currently stands at US$11.3 billion and domestic debt at K80 billion has heightened the risk of debt distress”.
She further said it is imperative that Debt Sustainability Analyses be a part of the overall debt management framework in order to help to assess the sustainability of debt.
“In terms of Medium-Term Debt Strategies, the first Medium-Term Debt Strategie (MTDS) was crafted in 2017 and was hardly implemented, the country is expected to develop another one this year but the first half of the year has already passed without any medium term guidance in light of the current Covid-19 pandemic and funds being borrowed to fight the pandemic, these medium-term debt management strategies are pertinent.” She said.
She explains that according to a study conducted by that the Consumer Unity and Trust Society (CUTS) and the Zambia Institute for Policy Analysis and Research (ZIPAR) on Zambia’s legal framework, the findings reveal that Zambia’s debt management system does not legally require the Government to develop these important debt management strategies thereby leaving room for debt to be contracted that exposes the country to the risks that come with borrowing.
“We are therefore, of the view that the law should require that the Government undertakes prudent debt management given that debt default can lead to severe macroeconomic consequences,” Ms Muyunda said.
“Policy guidance such as DSA and MTDS conducted in a systematic manner through rationalized borrowing plans should be mandated. This will work well in addition to having well-equipped human resources, coordinating institutions and the right organizational capabilities