Zambia institutes strict austerity measures


By Jeff Kapembwa

Lusaka - Zambia has instituted strict austerity measures at various points of national administration to defray expenses and instead concentrate on resolving the over US$16 billion indebtedness amid climate change effects that have downplayed economic growth in the Southern African state.

Against a background of a slower economic growth proportion of 2.3% against the projected 7% of Gross Domestic Product per annum, President Edgar Lungu stated the austerity measures were to avoid future contractions and instead resolve all outstanding debt obligations to both local and foreign creditors. 

This will help move the country from “a near crisis” situation in view of indebtedness which include US$3 billion owed in euro bonds and repayment due in 2022.

Addressing lawmakers during the 4th Session of the 12th National Assembly recently under the theme “accelerating sustainable development for a better Zambia amidst the impact of climate change” President Lungu said austerity measures that include all government and line ministries needed to be achieved without fail through cross-cutting and collaborative measures and produce results by doing more with fewer resources.

Noting the headwinds in the economy that has seen a slip in growth, with Zambia having registered 3.7% GDP last year, projected growth is now revised due adverse weather which has withered gains attained in the energy and agriculture sectors. Zambia needs to refocus and ensure the debt burden is resolved with verve despite climatic variabilities that have opened room for poverty.

“To have meaningful impact on the high poverty levels in the country, we must grow the economy at a minimum rate of 7 percent per annum. Our fiscal space must continue to grow, and this can only be achieved by ensuring macroeconomic stability and maintaining debt within sustainable levels.

“We have procured debt for development, which is one of the many financing options that we pursue. We can see it in the road infrastructure, bridges, alternative power generation investments, including but not limited to massive infrastructure development in the health, education and communications sector. This we all can see and attest to,” Lungu said.

Zambia realises borrowing is reciprocated by one’s ability to pay back.  President Lungu noted that the accumulation of local and domestic arrears had impacted heavily on the operations of the private and financial sectors as evidenced through increased non-performing loans coupled with cumulative pension arrears for retirees which if not managed, could increase poverty and affect lives.

Acknowledging the indebtedness from local and foreign creditors, Lungu said Zambia remains determined to create and manage fiscal space despite numerous challenges including bad weather on water bodies that have washed away gains in key sectors, thus slowing down growth, but that the challenges are surmountable.

“Needless to say, my government is optimistic to overcome these challenges, irrespective of the effects of the world phenomenon,” he said.

 “I want to place emphasis on the need to dismantle these arrears, while curbing further accumulation of arrears. I have directed those tasked with the responsibility of managing this debt stock to ensure that stringent measures are actively implemented. This is the new mantra that my government is working with at all levels.”

Ministry of Finance data shows non-discretionary expenditure, comprising personnel emoluments and debt standing at 50.1% and 40% respectively. This gives a total of 90.1% of Zambia’s annual budget-leaving the discretionary expenditure amount to stand at 9.9% of the country’s annual budget.

At the heart of austerity measures, there are plans to curb further accumulation and save money to dismantle arrears owed to suppliers. Positive results are expected to be achieved at all costs through cross cut collaboration among ministries and public institutions.

Lungu regretted the impact of climate change not only on Zambia but across the globe that was causing devastating effects through changes in the climatic conditions.

In Zambia, some effects have been felt through power load management at domestic and industrial level where power generation has been cut back by as much as 66 percent by power utility,  Zesco. This was after water regulators, the Zambezi River Authority, rationed over 80 billion cubic litres to avert damage to the dam and equipment.

Climate change, to a larger extent, has created varying conditions with negative effects within one country.

“I have further seen small businesses such as makeshift stalls, locally known as tuntemba, shutting down as they fail to cope with business due to load-shedding. How can a bakery owner run a business if their manufacturing process power is turned off at the same time water runs out?” President Lungu said.

“I see mothers and children in compounds walking long distances in search for water and queuing for it in the few places where it is available.  At household level, food is being wasted due to low voltage and consistent turning on and off of power.

“I have heard of people failing to leave or enter their homes because their electric gates malfunctioned due to power failure.”




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