Zambia is contemplating acquiring a US $ 1.2 billion loan from the International Monetary Fund (IMF) to cover budget deficits resulting from low tax revenue.
Owing to low prices of copper, the country’s major foreign exchange earner, the country’s fiscal deficit has plummeted as a percentage of the Gross Domestic Product (GDP) from -1.8 per cent in 2011 to -8.1 percent in 2015.
Zambia’s public debt was estimated at US $ 6.3 billion at the end of 2015 from US $ 1.2 billion in 2011 when the Patriotic Front (PF) government was voted into power.
In July last year government issued a US $ 1.25 billion Eurobond to narrow the budget deficit when copper prices plummeted on the international market, resulting in low tax revenue.
The US 1.2 billion loan awaits approval of the cabinet, which has not yet been composed owing to the Presidential petition that has been filed by the United Party for National Development (UPND) has filed against President Edgar Lungu.
Zambia intends to use the proceeds of the loan on infrastructure development especially in newly-created districts and implementation of the Seventh National Development Plan.
Opposition leaders, including Wynter Kabimba, leader of the Rainbow Party, are opposed to Zambia sliding back into another debt trap.
Kabimba, a losing candidate in the August 11 Presidential election, recently told Radio Phoenix, the country’s largest privately-owned radio station, that the loan was only going to benefit the elite.
Supporting the loan, Katele Kalumba, who was second President Fredrick Chiluba’s Finance Minister, said the IMF offered low interest rates.
Kalumba said the cost of borrowing would be high if it was done from the commercial market.
Zambia’s Eurobonds, forming part of largest proportion of the public debt, were acquired at a high cost from the commercial market.