DURING the national budget presentation recently, Minister of Finance Margaret Mwanakatwe said Zambia’s macroeconomic focus for 2019 includes, among others, prioritising the dismantling of arrears and curtailing accumulation; as well as reducing the pace of debt accumulation and ensure sustainability.
Particularly, there has been concern over the growing debt that, if not kept in check, Zambia could easily slip into debt distress.
As at end of June 2018, Government’s external debt stock stood at US$9.4 billion, representing 34.7 percent of gross domestic product (GDP).
The total stock of government guaranteed debt stood at US$1.2 billion.
The stock of domestic debt in the form of government securities amounted to K51.9 billion as at end of June 2018 representing 19.2 percent of GDP.
Domestic arrears amounted to K13.9 billion by end of March 2018.
While the debt accumulated so far is still within the allowable threshold in comparison to the GDP, Government has taken a stance to slow down on accumulation while dismantling the existing one.
In June 2018, Government undertook to implement a number of measures to return the country to a moderate risk of debt distress in the medium term and to low risk over the long term.
This, however, does not mean that Government has to abandon borrowing completely. Regardless of the situation, Government needs to borrow money to supplement the budget to finance the country’s development programme.
For instance, the 2019 budget is estimated at K86.8 billion and of this amount domestic revenues account for 64.6 percent, while 2.2 percent is support from cooperating partners.
Government is therefore expected to meet the 33.2 percent deficit through domestic and foreign borrowing.
On the domestic market it has been observed that Government sometimes ends up borrowing its own money at an interest.
This is because while one ministry may be in need of finances to implement urgent programmes, on the other hand, other ministries may have funding sitting idle in commercial banks waiting for implementation of projects. Some of this money is sometimes forfeited back to the treasury due to lack of utilisation.
It is, however, commendable that in its continued implementation of cost-saving measures, Government has implemented Treasury Single Account (TSA).
This is a tool aimed at consolidating and managing Government’s cash resources, thereby minimising borrowing costs.
Government has found itself borrowing its own money from commercial banks through treasury bills and government securities during periods when the treasury has no money.
According to the Accountant General, “The TSA is facilitating effective cash management and provides flexibility for the treasury to move idle resources from one ministry to another to meet immediate cash needs. The TSA has also enabled Government to reduce borrowing of its own idle funds kept in commercial banks by line ministries, provinces and agencies.”
Certainly it is illogical for Government to continue borrowing and paying interest on its own resources.
At a time of austerity measures, we cannot afford to be that carefree and allow banks to make a fortune on government resources.
Besides helping Government reduce on borrowing its own funds, TSA alongside the integrated financial management information system will also enhance international controls and provide audit trails for all transactions conducted on the two platforms.
This will ensure accountability and effective management of public funds.
Through the TSA, Government will also make a saving on interest rates which can be diverted to dismantling domestic arrears and meeting other development needs.
Whilst agreeing that this is a good decision, it would come to naught if implementation is ineffective.
It is, therefore, hoped that the technocrats charged with the responsibility of implementation will do so effectively and diligently to attain positive results.