The IMF has warned that public debt is growing unsustainably, citing the increase in publicly guaranteed debt from 36% of GDP in 2014 to 60% in 2016.
The Fund’s comments come following guidance from the Minister of Finance Felix Mutati that the government is looking to triple domestic borrowing in 2018, and amid continued discussions regarding a $1.3 billion IMF bailout package that started back in 2015.
Following the most recent engagement the Fund has stated the following:
“Public debt has been rising at an unsustainable pace and has crowded out lending to the private sector and increased the vulnerability of the economy…
Directors expressed concern at the pace at which public debt, especially external debt, has increased and now put Zambia at high risk of debt distress. They commended the progress made in developing a medium-term debt strategy…
Domestic risks to the outlook include delayed fiscal adjustment which would continue to crowd out credit to private sector and entrench an unsustainable debt situation, and unfavourable weather conditions which would affect hydropower generation and agricultural output.”
The IMF’s resident representative in Zambia Alfredo Baldini has further confirmed that: “No substantive program discussions will be held at the Annual Meetings” despite comments from Ministry of Finance Permanent Secretary Mukuli Chikuba earlier this week that progress towards the bailout would be made during the upcoming IMF/World Bank Annual meetings in Washington.