Zambia’s upgrade

THE latest upgrade of Zambia’s rating outlook from negative to stable is a clear pointer of the country’s progressive gain towards growth and debt sustainability, two variables important for determining economic growth.

Thus Government must remain resilient in plugging leakages in the economy and also underpin priority sectors that include agriculture, manufacturing, construction, energy, tourism and mining.

It will also be prudent for the government to henceforth start financing projects through the Public Private Partnership (PPP) concept and own-generated revenues rather than through borrowing.

Already, Finance Minister Felix Mutati has announced that project financing will best be financed through the PPP and other sustainable concepts that would not land the country into a debt trap.

Indeed, Moody’s Investors Service, which released the rating outlook for Zambia at the weekend is a credible international agency whose latest appraisal should boost the country’s trajectory to economic stability and growth.

The stable outlook for Zambia mirrors reduced Government liquidity pressures and slowdown in debt build-up.

Consequently, the government must maintain consistency in fiscal consolidation under the economic stabilisation growth programme. The latest upgrade should not at any one time breed complacency.

Additionally, Government must ensure that the current attractive economic fundamentals are improved. The exchange rate is at K9 to US$1 while economic growth is projected at 5.0 per cent this year with benchmark interest rate at 10.25 percent.

All avenues that precipitate growth in priority sectors must be exploited to the full to ensure stability and a reduced fiscal deficit.

Yes, the government has projected to reduce the fiscal deficit this year to 6.3 percent from last year’s 7.0 percent while in 2019 and 2020 it is projected to further decrease to 4.3 percent and 2.6 percent respectively.

However, such projections will only be feasible if Government sticks to prudent management of resources. Borrowing should be reduced to a barest minimum.

Meanwhile, Government must without delay redeem infrastructure development through self-financing in areas where projects have stalled to stimulate growth activity in the economy which may otherwise face contraction.

Government spending is a catalyst to economic growth but such spending must always be prudent. This will invariably entail that other players in the economy will be active and grow their undertakings.

It is important to speed up operationalisation of the sinking fund to quickly refinance the country’s three Eurobonds - £750 million, $1 million and $1.25 million that are all due between 2022 and 2027.

So far, $20 million has been set aside for the sinking fund that will be a transit account for repayment and would be backed by law. If the sinking fund is handled diligently with consistent financing, it will assist in narrowing the fiscal deficit.

Other than this, the government must explore more debt financing options to ensure that the country is not choked with unsustainable debt.

For the country to navigate through financial malaise with maximum ease, the political space must be cleaned up.

This is because political stability is key to economic stability – the two are intertwined.

The current political bickering which at times degenerates into violence may scare potential investors at the time the country requires to shore up its investment portfolio for economic growth.

The ruling Patriotic Front and the opposition parties must deeply reflect on the imperative need to have a decent political atmosphere in the country as the daily insults and finger-pointing is not a positive attribute for economic stability.

The culture of mobilising cadres at police stations when summoned is draconian and must be done away with while clashes of members from opposite camps portrays the country as potentially unstable.

It is time for all political parties to sober up and urgently espouse political dialogue as ugly scenes are distorting the country’s image abroad.

Thus Zambia must fervently refine the political environment alongside improving economic prudence for maximum growth effect.