By Jeff Kapembwa (Southern times)
Zambia’s external debt is rising by eight percent per annum, according to the Bank of Zambia.
In 2005, the country was granted debt relief under the Highly-Indebted Poor Countries scheme and at that time the arrears amounted to more than US$7 billion.
The Bank of Zambia said at the end of 2010, the external debt had grown 7.7 percent to US$1.6 billion.
This was on the back of increased disbursements to various creditors, including the African Development Bank, the IMF and the World Bank.
On March 4 this year, Acting Finance Minister Peter Daka told lawmakers that Zambia’s external debt stood at US$1.2 billion.
The country’s debt in 2005 stood at US$500 million after Zambia’s US$7 billion was forgiven but it has been growing steadily since then.
Daka said in March that Zambia could not develop while borrowing at current levels. He, however, said the government’s foreign borrowing was at ‘a reasonable’ interest rate of point 7.5 percent while domestic interest rates stood at 15 percent.
The government says it is borrowing in order to sustain economic growth in the country.
There have been concerns that Zambia’s debt was growing at an unsustainable rate and the country might soon find itself in the ‘debt trap’, where it would have to borrow just to pay off arrears on prior borrowing.
Daka reassured the nation that Zambia was not at risk of falling into a debt trap because the government had the capacity to pay back any loans.