8 December 2017

Zambia: World Bank Gives Borrowing Lessons

THE World Bank has advised Zambia to implement a well crafted strategy to reduce the cost of borrowing, extend the terms and diversify the sources of debt funding.

And Zambia's economic growth is expected to strengthen to 4.3 per cent in 2018 and 4.7 per cent in 2019 as Government continues to implement its economic reform programmes.

The forecasts are however, lower than what the World Bank predicted in June of 4.1 per cent expansion this year and 4.5 per cent next year.

This is according to the Zambia Economic Brief, 'How Zambia Can Borrow Without Sorrow,' released by the World Bank Group in Lusaka yesterday.

World Bank senior economist Gregory Smith explained that the report highlights that Zambia was tapping debt capital markets and had many sources of borrowing but that a new active approach to debt management was needed that contrasts with the passive approach to debt management since debt relief.

Mr Smith said the debt needed to be managed carefully and the proceeds of borrowing shrewdly invested.

"Opportunities for finance should not be an automatic cause for celebration and signatures, instead a careful strategy and improved debt management is required," he said.

Mr Smith said economic growth in Zambia was expected to improve only modestly to 3.8 per cent this year up from 3.6 per cent the previous year.

He said despite a bumper harvest, improved electricity generation and easing of monetary policy, economic recovery in Zambia had remained subdued in 2017.

"This follows weak performances of service mining and construction sectors, however growth is expected to strengthen to 4.3 per cent in 2018 and 4.7 per cent in 2019, the forecast assumes government will continue to implement its economic reform programme," Mr Smith said.

Bank country manager for Zambia Ina Ruthenberg said debt was an important source of development finance and a key tool for eradicating poverty.

Ms Ruthenberg said there was a need to look closely at ways of improving debt management to ensure that economic growth had sustainable foundations and borrowed money invested wisely to ensure inclusive growth.

"Countries all over the world borrow to finance their investment and development, Zambia is not different and has huge and immediate infrastructure needs," she said.

Finance Minister Felix Mutati said Government would enhance efforts in domestic resource mobilisation and enhance tax compliance as it was what created the capacity to deal with debt.

"Unless you address your efforts in that area, debt will still remain a white elephant in the room.

" Going forward, the economic brief should focus on the positives and not the negatives, it should give solutions to the problems, we already know the problems as it is, what we need are solutions and as Zambia we are capable of solving our own problems," Mr Mutati said.

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