UNDERSTANDING ZAMBIA’S DEBT PROBLEMS – OUT OF EVERY K100 ZRA COLLECTS PF USE K76 IN DEBT SERVICE
Two indicators are essential to determine the debt burden, and these are: (i) debt-as a percentage of GDP; and (ii) debt service-as a percentage of revenue.
Debt-as a percentage of GDP measures how much debt we have compared to our wealth or GDP as a country. It measures our ability to pay our debt. Recently the Permanent Secretary of the Ministry of Finance said that Zambia’s debt is over 90 percent of GDP. This simply means that if the owner of loans decided to call them, we would need to give away 90 percent of our wealth to pay our creditors.
The second and most crucial indicator measures how easy it is for us to pay our debt without resulting in giving away our wealth or assets. It estimates how much of our income we earn every month or per year goes to pay the debt.
The Minister of Finance at the beginning of the year told us that Zambia had budgeted K21.9 billion for external debt service and K12.63 billion in domestic debt. Again, last week the Minister of Finance said to us that ZRA in 2020 will collect K47.0 billion and that debt service had increased by K2.2 billion.
What this means is that in 2020 out of the K47 billion ZRA will collect K35.92 billion will be spent on debt service. So, our debt service as a percentage of revenue is 76.4 percent. This means that out of every K100 the PF government collects K76 is spent in paying back nkongole that was used among other things to build cheap roads that are already breaking up and other corrupt activities like the 48 houses, the overpriced fire tenders and others.