…Zambia may face challenges in refinancing maturing debt
By BUUMBA CHIMBULU
THE Medium-Term Debt Management Strategy (MTDS) 2023-2025 has indicated that Zambia may face challenges in refinancing its maturing debt in the absence of a strategic approach.
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According to the MTDS published recently by the Ministry of Finance and National Planning, this could potentially lead to higher borrowing costs and disruptions in debt servicing.
As at end of the first quarter of 2023, Zambia had a total external debt stock of US$14 billion owed to a collection of private, bilateral, and multilateral lenders.
Government in the MTDS indicated that a comprehensive strategy enabled optimisation of its borrowing terms, aligned debt maturities with cash flow projections, and diversified funding sources.
Additionally, according to the strategy, the absence of an MTDS could hinder the ability of Government to effectively manage its debt portfolio.
“The lack of a well-defined and sustainable MTDS creates several problems and vulnerabilities for a nation’s fiscal health. One key issue is the increased risk of debt accumulation and unsustainable debt levels.
“This lack of strategic planning can result in increased borrowing costs, and a heightened vulnerability to financial crises,” according to the strategy.
Government has, therefore, put in place the MTDS which served as a roadmap for managing a country’s debt over a medium-term horizon, typically spanning three to five years.
The MTDS is a crucial component of effective public financial management.
The MTDS highlighted that addressing these challenges required the development and implementation of a comprehensive and sustainable strategy.
“This involves conducting thorough debt sustainability analyses, setting clear debt management objectives, establishing robust reporting mechanisms, enhancing transparency and accountability in debt-related decision-making, and fostering a culture of fiscal discipline.
“By adopting a strategic approach to debt management, Zambia can mitigate risks, maintain fiscal stability, and create a conducive environment for sustainable economic growth,” the strategy stated.
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