Business

State urged to settle debt obligation

TRYNESS TEMBO, Lusaka
GOVERNMENT should consider settling its debt obligations from the revenue that will be accrued from export of copper, whose price is currently trading at over US$6,800 on the global market.

Yesterday, copper continued on its upward slope trading at US$6,808.50 a tonne on the London Metal Exchange (LME).
Zambia Institute for Policy Analysis and Research (ZIPAR) notes that if Government starts with settling its debt obligations, it will make it possible for it to benefit while copper prices are still high.
“Zambia is in a predicament because since 2011, the economy has borrowed a lot and raked up its total debt. So the first claims on any fiscal space and balance of payments [BoP], space that is created are by Zambia’s creditors.
“That is, whenever Zambia gets any money through the national budget [fiscal side] or export earnings [BoP side], it will first have to settle its debt service obligations before it can look at how to spend for growth and development. Thus, this will be very little scope to harness the benefit while copper prices are still high,” ZIPAR knowledge manager Euphrasia Mapulanga said in response to a query.
BoP is the difference in total value between payments into and out of a country over a period.
Mrs Mapulanga said the best Zambia can do is to also manage its debt very well and reduce it as much as possible in the period leading up to 2021-2025 when the country will have to pay back the principle amounts on the three Eurobonds, which collectively amount to US$3 billion.
She advised that Government must begin to depend more on the private sector to run the economy than on direct state participation in economic activity.
However, she says before government continues to spend on salaries and infrastructure development, it means that there will be no economic activities implementation.
“If the government keeps spending on itself [in terms of salaries, Government-focus programmes, government infrastructure development like new district administrations, new health facilities, new public school among others] – who will carry out the economic activity from which future taxes will be raised ?” she said.

 

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