Ng’andu explains country’s ‘bulged’ foreign debt

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    FINANCE minister Dr Bwalya Ng’andu says Zambia’s foreign debt position, as at June this year, stood at US$11.97 billion.

    This is compared to the US$11.48 billion external debt the country had, at the close of last year.

    In his 2021 national budget speech in Parliament on Friday, the minister attributed that debt increase to disbursements on existing loans, which are financing various projects in the energy, education, road and health sectors.

    The budget total is 119.6 billion and the government projects that K68.0 billion would come from domestic revenues and grants, while the balance, K51.6, would come through financing.

    “The external public debt stock increased to US$11.97 billion as at end-June 2020 from US$11.48 billion at the close of 2019, representing an increase of 4.3 per cent,” he said.

    “The stock of government guarantees, on a net basis, was US$1.58 billion as at end-June 2020. These guarantees are mostly for power projects in the energy sector.”

    He said the stock of government securities increased to K114.3 billion as at end last month, from K80.2 billion as at end December 2019.

    Dr Ng’andu indicated that such included the COVID-19 bond.

    “The increase of 42.5 per cent was on account of the need to finance key expenditure areas such as Farmer Input Support Programme (FISP),” he said.

    Dr Ng’andu also informed the House also that the COVID-19 bond proceeds were used to stimulate economic activity through dismantling of arrears, payment of Value Added Tax (VAT) refunds and liquidation of outstanding pension arrears.

    In addition, the minister disclosed, the National Savings and Credit Bank had been recapitalised to facilitate the provision of financing to small and medium enterprises.

    “The proceeds were also used to finance youth empowerment programmes, procurement of medical equipment, drugs and medical supplies,” Dr Ng’andu said.

    Dr Ng’andu, on monetary and financial performance, highlighted that over the first eight months of this year, inflation exceeded the medium-term target range of six-eight per cent, averaging 15.0 per cent.

    For this month, inflation stands at 15.7 per cent.

    “Inflation rose to 15.5 per cent in August from 11.7 per cent in December 2019. This was mainly driven by the upward adjustment in energy prices, higher food prices and the pass-through from the depreciation of the kwacha,” explained Dr Ng’andu.

    “The commercial banks’ average lending rate declined to 25.8 per cent in August 2020 from 28.0 per cent in December 2019. This was mainly driven by the reduction in the Monetary Policy Rate to 8.0 per cent from 11.5 per cent and the improvement in liquidity levels in the market.”

    ©Kalemba 2020

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