Putting the debt into perspective
Zambia’s total debt (foreign and domestic) stood at $8.65 billion as at December 2015, equivalent to a debt-to-GDP ratio of 52.7% as of 31 October 2015, according to Deputy Finance Minister Christopher Mvunga, who assured parliament that this was still below the indicative threshold of 56% for public debt distress.
This could probably do with a bit of perspective: through the Highly Indebted Poor Country (HIPC) and Multilateral Debt Relief (MDR) initiatives, Zambia reduced its national debt from $7.1 billion in 2001 to less than $1 billion in 2006.
When the former MMD government exited in 2011, national debt amounted to about $4 billion. Thus, the MMD increased national debt by about 400% in the five years from 2006 to 2011, while the PF has increased debt by about 120% in the four-and-a-half years from 2011 to today. The PF can therefore not be said to have borrowed excessively in comparison with the MMD.
However, our current debt is definitely bigger than before Zambia was granted debt relief. The whole idea behind debt relief was to provide the economic space to develop, and one could therefore extrapolate that we have borrowed ourselves into a financially tight corner with no room for development going forward. Yet, Zambia’s economy – and its ability to pay off debt – has grown a lot since 2001.
All we can do is to hope that the borrowed money has been put to good use in properly prioritised, planned and executed capital projects with the ability to sustain the economic return necessary to pay back the loans…
Camilla Hebo Buus, Editor Zambia Weekly