By KENNEDY MUPESENI
FORMER Bank of Zambia (BoZ) governor Caleb Fundanga has urged Government to supplement the Medium Term Debt Management Strategy (MTDMS) with renewed focus on fiscal restraint.
Dr Fundanga said Government should supplement the MTDMS with a renewed focus on fiscal restraint, management of the debt pipeline and monitoring of domestic lending to ensure business continue to access capital at affordable rates.
“These actions need to be backed by improved debt management capability. Fiscal consolidation, or strong policies to reduced deficit and accumulation of debt stock, and measures to enhance revenue collection are expected to feature prominently in the MTDMS, but they are not present,” he said.
Dr Fundanga said this in a paper published by the Economic Association of Zambia (EAZ) yesterday dubbed, Fit for Purpose: An analysis of Zambia’s MTDMS.
Dr Fundanga said budget discipline, as well as measures to deal with loss-making parastatals are central features of fiscal consolidation and prudent debt management.
While the charging of cost reflective electricity tariffs, removal of fuel subsidies and some agricultural input subsidies have been undertaken by the government, he said  there were  still a number of loss making parastatals remaining.
“These are the same entities responsible for government contingent liabilities (which the MTDMS is silent on, but are classed as public debt by the International Monetary Fund (IMF) and international bodies).
“For Zambia what is particularly worrisome is the increasing number of parastatals being established by the Industrial Development Corporation (IDC) including the establishment of a national airline, most likely, with borrowed funds,” Dr Fundanga said.
He said that the MTDMS should encompass plans to manage such loans, but that currently it did not.
In addition to ensure Parliamentary oversight in the contraction of new loans, Dr Fundanga said the government should facilitate for the enactment of the Public Finance Act.
Such a law would ensure that no new loans can be contracted without the approval of Parliament.
“Despite these potential gaps the MTDMS is a huge step forward and presents a welcome move by the Government in tackling the rising debt challenge. But the MTDMS can only be a success if the capacity, capability and resources are in place to implement the MTDMS,” he said.
Dr Fundanga said good debt management requires that the National Debt Office was well staffed adding that the country required well qualified officers to facilitate the segregation of front, middle and back offices.
Further debt office staff should be professional enough to be able to tell the Government when its borrowing is excessive.