Zambia: Selected Issues

IMF Staff Country Reports, October 25, 2017

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Zambia: Selected Issues

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Bibliographic details

• Published: October 25, 2017
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781484325377.002

Summary

• This Selected Issues paper assesses the sustainability of Zambia’s current fiscal policies and public debt.
• Large fiscal imbalances and rapid increase in government debt since 2011 have raised concern about the sustainability of fiscal policies in Zambia.
• Fueled by the rapid exchange rate depreciation in 2014–15 and the heavy reliance on external sources to finance the growing fiscal imbalances, public external debt doubled in 2015 compared with 2014.
• The institutional framework for the budget process and the Medium-Term Expenditure Framework need to be strengthened.
• Poor commitment controls, which led to significant accumulation of payment arrears, need to be addressed.
• A sound Medium-Term Debt Management Strategy is required to reduce public sector debt vulnerability.

Key findings and issues assessed

• Fiscal trajectory and public debt sustainability since 2011.
• Impact of the rapid exchange rate depreciation in 2014–15 on public external debt.
• Heavy reliance on external sources to finance fiscal imbalances.
• Weaknesses in the institutional framework for the budget process and the Medium-Term Expenditure Framework.
• Poor commitment controls and the resulting accumulation of payment arrears.
• Need for a Medium-Term Debt Management Strategy to reduce public sector debt vulnerability.

Policy recommendations

• Strengthen the institutional framework for the budget process and the Medium-Term Expenditure Framework.
• Improve commitment controls to prevent accumulation of payment arrears.
• Develop and implement a sound Medium-Term Debt Management Strategy to reduce public sector debt vulnerability.

Subjects and keywords

• Subject: Energy subsidies, Expenditure, Fiscal policy, Inflation, National accounts, Personal income, Prices, Public debt, Social protection spending
• Keywords: Africa, borrowing cost, CR, debt, GDP, Global, income, income distribution, Inflation, ISCR, market income, Personal income, poverty, social cash transfer, Social protection spending, Southern Africa, tax-to-GDP ratio, trade tax, wage bill, Zambia, Zambia kwacha

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