Zambia’s domestic debt soars to K51 bn in 2016

Thu, 13 Apr 2017 08:30:49 +0000

By Mailesi Banda

THE Zambian domestic debt as of 2016, inclusive of arrears, stood at K51, 821.77 billion, former Bank of Zambia governor, Caleb Fundanga, has disclosed.

Dr. Fundanga said of the K51, 821.77 billion, Treasury bills accounted for 26 percent, Government bonds 38 percent and arrears at 36 percent.

The former governor of the central bank said the high proportion of arrears was not a good sign as it would imply existence of weaknesses in the Government financial management system.

“Recent trends show a sharp increase in domestic debt markets; domestic debts rose by 182 percent from K11.7 billion billion in 2011 or 10 percent of the gross domestic product (GDP) to K33 billion in 2016 which is 15 percent of the GDP of the country,“ he said. He said domestic borrowing was an important source for the financing of the Zambian economy, adding that the need to finance the growing budget deficit as a result of the low tax revenues was the major reason leading to increased borrowing.

He said primary deficit increased from an average of 1 percent between 2005 and 2011 to 5 percent of GDP from 2012 to 2016. He explained that this was triggered by expansionary fiscal policy, decline in revenue and increased interest payments.

He said the depreciation of the exchange rate from the K6.3 per dollar in 2014 to K13 per dollar in 2015 increased public debt between 2014 and 2015.

He stated that public debt would have been higher had it not been for the real GDP growth rates.