Maravi

Zambia needs sustainable borrowing patterns - Fundanga

Zambia needs sustainable borrowing patterns - Fundanga
By Jack Zimba and Joan Chirwa
Thursday May 08, 2008 [04:00]

GOVERNMENT is currently developing a debt strategy to control the country’s borrowing patterns, Bank of Zambia (BoZ) governor Caleb Fundanga has said. Appearing before the parliamentary committee on economic affairs and labour on Tuesday, Dr Fundanga said Zambia needed strategies to ensure responsible and sustainable borrowing patterns are adopted by the government. He said the move was not meant to prevent government from borrowing but to ensure that resources were borrowed for specific economic programmes.

“The debt strategy which is currently in draft form will provide a clear framework for governing debt contraction and management,” Dr Fundanga said.

He said government’s total external debt, which now stood at US $1.1 billion, was still a challenge for the country.

“Borrowing should be for productive activities so that we can have the ability to pay back,” Dr Fundanga said. “Domestic debt is also a matter which needs to be addressed as it carries some interest, so government has to mobilise this money to pay back. Borrowing sometimes is not good for the future of the country and that is why we needed guidelines for borrowing by the government.”

Dr Fundanga also called for investment in the power sector, saying, “there is no nation that can hope to develop without investing in power.”
He said even government programmes such as the Irrigation Support Programme could not succeed without a sustainable power sector.

He further cautioned against subsidised credit in the country’s pursuit to develop.

“Subsidised credit must not be encouraged because we need viable financial institutions,” Dr Fundanga said. “For example, we had Lima Bank and the Co-operative Bank which used to give credit to farmers at subsidised rate. These institutions operated so much on subsidies and in the end when government became broke, these institutions could not operate.

This is why these institutions need to operate as serious business entities in order to survive in an event that government runs out of money.”

Labels: BOZ, CALEB FUNDANGA, DEBT

posted by MrK @ 12:38 PM