Economist warns of debt trap

GOVERNMENT risks being in a debt trap due to its continued borrowing because it is already under pressure to repay some of the debt it has contracted, says financial analyst Maambo Hamaundu.

Mr Hamaundu said the recent approval by Cabinet to borrow more than US$642 million to pay Chinese lenders only increased debt contracted by Government.

“It is something we should be concerned about; and very worrying that Zambia has to borrow to pay borrowing institutions.

“Warnings have been there from various sectors including the World Bank that borrowing is no longer sustainable; we ought to look at alternatives,’’ he said.

He said there was need to suspend some projects countrywide because Government at the moment did not have the capacity to engage itself in building projects.

Mr Hamaundu explained that as it stands now, it was clear that Government was operating under stress with little resources available.

“Our cost of borrowing is high, hence creating a debt trap for the country and putting the future generation in big trouble. This is something to be reconsidered,’’ he said.

He said that Government would in the long run continue with its projects when the economy had stabilised.

“Some of these projects the money is not indicated where it has been borrowed from; which is why as a country we must consider suspending some of them because we cannot afford.

“Clearly, we do not have capacity to do some of these projects at the moment. This is not to say in the long run we will not have capacity to do them but for now we are incapable because we do not have the money,’’ he said.

Mr Hamaundu also said the outlook for 2016 was equally worrying because Government might not achieve the set goals.

He said agriculture, which was supposed to be the country’s saviour was also under strain because farmers had reduced on production due to high cost of farming inputs.

“When you look at what is supposed to be the saviour, the agriculture sector, people have reduced on hectarage because the cost of inputs has been exorbitant and they cannot afford to buy it,’’ he said.

He said Government discouraged farmers to grow sufficient produce because last year it took long to pay them after selling their maize to the Food Reserve Agency.