Analysts have warned that Zambia’s external and local debt will become unsustainable by 2018 because of the country’s lower middle-income status, the Times of Zambia reported on Monday.
The Zambia Institute for Policy Research, a local economic think-tank, has predicted that the attainment of the lower middle income status entails that there is less concessional loans available for the country hence the need to be cautious when accruing loans.
In 2011, the World Bank reclassified Zambia as a lower middle income nation.
Shebo Nalishebo, a research fellow at the think-tank said if the current trend was not checked the debt-to-Gross Domestic Product (GDP) ratio could reach 50 percent by 2018 which would be beyond the 40 percent threshold.
Speaking at a public foreign organized to discuss the country’s rising debt, the expert said although the current external and local debt estimated at 7.2 billion U.S. dollars was still sustainable as it accounts for 30 percent of GDP and still below the threshold of 40 percent, it was becoming a source of concern.
According to him, the debt-to-GDP ratio of 40 percent was the suggested sustainable threshold for developing and emerging economies, the prevailing economic condition in Zambia and Zambia’ s economic status as a lower middle income nation would result in the debt becoming unsustainable.
The Jesuit Center for Theological Reflections (JCTR), another economic and social think-tank, said high debt levels implied high debt servicing amounts which if not well managed could lead to serious consequences.
Musonda Kabinga, a programs officer from the think-tank, said during the same occasion that borrowing should take into account the country’s capacity to pay back without affecting the delivery of essential services to the public.
Zambia’s rising debt has been a source of concern from various stakeholders who have accused the government of being reckless in its borrowing.
Some experts have called for a debt contraction law, which allows the minister of finance to borrow on behalf of the nation, to be amended so that lawmakers can have a say in how the country borrows.
But Minister of Finance Alexander Chikwanda has assured that the government will not be careless in the way it was borrowing money, saying it was aware of the dangers of over-borrowing.