Growing Domestic Debt Threatens Jobs, Prices and Markets
Zambia’s domestic debt is rising rapidly. The country’s domestic debt profile is already above K240 billion (approximately USD 12 billion at current rates) and is approaching the medium-term target ceiling of K300 billion (USD 15 billion).
Rising borrowing costs threaten jobs, pushes up prices of key basic goods, and putting most vulnerable households at risk.
The approach to this medium-term ceiling is quite concerning. At K240+ billion, fiscal space is already limited, leaving the economy exposed to financial strain.
Recent increases in bond ticket sizes signal rising budget pressure and on the other investors confidence, but excessive domestic borrowing risks unsustainable debt, higher interest rates, and crowding out private sector credit expansion.
Poor and vulnerable households are at most affected. Higher borrowing costs increase the price of essential goods, slow job creation and reduce household incomes.
Excessive domestic debt also diverts resources away from critical social sectors such as health, education and social protection, undermining poverty reduction effects and inclusive growth efforts.
To protect livelihoods and maintain economic stability, domestic borrowing must remain within prudent limits, while long-term, concessional external financing should be prioritized for growth-enhancing and revenue-generating projects.
