MUTATI CALLS FOR PRUDENT ASSESSMENT OF DEBT

Thu, 28 Sep 2017 13:01:34 +0000

By BENNIE MUNDANDO

THERE is need for us to re-assess and re-position ourselves to manage our sovereign debt in the wake of rapidly changing global economic environment which has brought fiscal vulnerabilities to the fore, Finance Minister Felix Mutati has said.

Mr. Mutati said volatile exchange rates, subdued commodity prices and declining capital flows amidst increasing financing needs had continued to be serious issues that both emerging and developing countries were grappling with hence the need  to take precautionary decisions.

He said the country had been faced with serious challenges of how to select an optimal mix among various financing options, with varying cost and risk characteristics, amidst a volatile environment, and how to ensure debt sustainability in the long-run.

“Notably, the increase in direct or indirect contingent liabilities, coupled with an increase in various financing options which provide an enticing alternative financing source to traditional sources of financing has also created a new dimension to debt management. This scenario presents potential sources of fiscal risks for central governments.

“In the light of these developments, never before has the need to re-assess and re-position ourselves with regard to the management of our sovereign debt been so critical. We are faced with serious challenges of how to select an optimal mix among various financing options, with varying cost and risk characteristics, amidst a volatile environment, and most importantly, how to ensure debt sustainability in the long-run,” Mr. Mutati said.

He noted that the Medium Term Debt Strategy (MTDS) 2017-2019, which had been developed using a rigorous quantitative assessment and evaluation of the cost and risks associated with Zambia’s public debt portfolio, will serve as an important tool in guiding decision-making on prudent debt management.

“As a country that has been through debt distress and that greatly benefited from debt relief under the HIPC Initiative, Zambia needs to rise above these challenges and ensure that debt is prudently secured and managed to ensure sustainability for the benefit of future generations.