1. Reversing Zambia’s high risk of debt distress
- Author:
- Florence Banda-Muleya and Shebo Nalishebo
- Publication Date:
- 08-2018
- Content Type:
- Working Paper
- Institution:
- Hudson Institute
- Abstract:
- A load of unsustainable debt hangs heavy over Zambia. Zambia is part of a list of 25 low income countries considered at high risk of debt distress in 2018. Government’s efforts to reduce the country’s infrastructure gap as well as bring down poverty and inequality have resulted into large spending overruns, a growing subsidy bill and a substantial public sector wage bill over the last five years. Alas, domestic revenues remained low and stagnant. So Government resorted to massive external borrowing to finance arguably unsustainable expenditure. This approach to spending pushed borrowings to about 59% of GDP as at end of 2017, which is in the territory of unsustainable debt levels. In October 2017, the IMF issued a red flag that Zambia was at high risk of debt distress, implying that the country was likely to breach the thresholds for debt and debt service indicators and, should it continue on the same trajectory, it would likely default on its debt service obligations.
- Topic:
- Debt, Poverty, Economy, and Public Debt
- Political Geography:
- Africa and Zambia