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JCTR warns of Zambia’s increasing debt burden

JCTR warns of Zambia’s increasing debt burden
By Maluba Jere
Wed 23 Mar. 2011, 04:00 CAT

JCTR has warned that Zambia's sovereign credit rating may increase the country's debt burden.

In a press statement on Monday, Jesuit Centre for Theological Reflections programme manager of economic equity and development Geoffrey Chongo stated that while a sovereign rating is a milestone for Zambia as it offers alternative sources of financing to traditional ones, it is important to be mindful of the debt burden implication of this development for the country.

Chongo noted that as long as Zambia continues to borrow to finance projects that have no direct benefit to the people, the sovereign rating will mean nothing to Zambians.

He stated that the grade itself was not good enough to attract loans at very low interest rates. Zambia has been rated with a B+ by an American Credit Rating Agency, Fitch Ratings.

The rating is meant to estimate Zambia’s credit worthiness and has been partly influenced by, among other things, low levels of external debt, a fast growing economy and a stable political environment.

“As the B+ status implies a high possibility of default by the country issuing bonds, Zambia will have to offer high interest rate on bonds to attract investors which will certainly increase the county’s debt burden and ultimately compromise government’s ability to deliver social and economic services,” Chongo stated.

He noted that the country's external and internal debts had been steadily rising and warned that if left unchecked, they might take the country back to unsustainable debt levels of the pre HIPC/ Multilateral Debt Relief Initiative period.

“The public external debt currently stands at US$1.2 billion and with the pending issuance of US$1 billion worth of bonds it will soon rise to US $2.2 billion,” he stated.

Chongo stated that although a larger share of external debt is private, part of it was publicly guaranteed and that if private and parastatal borrowers failed to pay, the Zambian people would have to pay.

He advised the government to be cautious in the way it contracts new debts.

Chongo stated that the sovereign rating must bring about real development into people’s lives, otherwise it will be meaningless to the majority of Zambians.

Labels: DEBT, JCTR

posted by MrK @ 4:45 AM