High debt burden put to new test

Africa is in the throes of a rapid economic transformation. From 2000-2013 GDP in Zambia more than doubled. Because its agriculture and mining industries are leading sectors, it is poised to continue that ascent….

Africa is in the throes of a rapid economic transformation. From 2000-2013 GDP in Zambia more than doubled. Because its agriculture and mining industries are leading sectors, it is poised to continue that ascent. The National Bank of Zambia projects GDP growth at 5.4 percent in 2020. Poverty rates are coming down, which is reflected in the growing wealth of the poor. Overall living standards are improving. Unemployment is lower than in many other developing countries. A more inclusive economic climate provides Zambians with an opportunity to increase their chances of making ends meet. But the country is not immune to challenges.

One example is the backlog of unpaid national debt that makes financing development difficult. Indirect debt, many years into a project, is much higher than in developed countries. All of this compromises the capacity of Zambia to promote and implement new projects. Research has shown that a declining public sector costs the country less in terms of its capacity to finance social needs. This then weakens its institutions, and creates a risk of economic stagnation.

While this issue is in the spotlight in Zambia, finance minister Felix Mutati has called on the IMF to support investment that will help ease the financial burden on Zambia’s budget and end this historical debt burden. The IMF should act accordingly.

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