The Zambia Institute for Policy Analysis and Research (ZIPAR) has urged the government to indefinitely postpone the contraction of all pipeline debt until the debt is brought back to moderate risk of debt distress.

The institute says this is likely to address the reported disagreement with the International Monetary Fund (IMF) with regard to access to a credit facility.

Speaking during the post budget analysis in Lusaka, ZIPAR Research Fellow Shebo Nalishebo there is further need for the government to cancel some of the current contracted loans that are yet to be disbursed to reduce the debt service outlays.

Mr. Nalishebo notes that while this brings some relief in the short term, it is likely to be costly in the long term as Govt is likely to be sued for breach of contract, and the earmarked projects will stall.

“Undertake refinancing on selected bilateral loans, both local and external to extend the maturity profile and attain lower costs on debt: this will offer the much-needed short term relief. But bilateral loans are only a small part of the debt portfolio and account for less than 5% of the total external debt,” he said.

He has also observed that the need to cease the issuance of letters of credit and guarantees to state owned enterprises that are technically insolvent until their balance sheet challenges are resolved.

He says state-owned enterprises are the main source of contingent liabilities which are presently estimated at US$1.2 billion.

Mr. Nalishebo says high levels of contingent liabilities can lead to an increase in the risk premium on public debt.

“Government to only sustain loans whose projects are at least 80% completion: the allocation of K442.7 million for the construction of the FTJ University, a green-field project in Luapula Province, and the Copperbelt International Airport, at 13% completion, goes against this measure,” Mr. Nalishebo said.

And in her official opening, ZIPAR Executive Director Dr. Pamela Kabaso says there is need for government to take a different approach in order to deliver on fiscal consolidation.

Dr. Kabaso says the paths that the government has taken in the past years have not delivered the desired fiscal outcome.

Dr Kabaso says advancing the interests of the nation and requires collective commitment to implement ambitious and bold reforms.