HIPC states urged to avoid debt trap

By MAIMBOLWA MULIKELELA –
POST Heavily Indebted Poor Countries (HIPC) like Zambia should contract sustainable economic debt to avoid falling back in the debt trap, Finance Deputy Minister Christopher Mvunga has said.
With the volatile exchange rates, falling commodity prices, climate induced adverse changes and declining capital flows, post HIPC countries need to be cautious in the way public debt is contracted.
Mr Mvunga said a number of developing countries were grappling with the volatile global environment hence the need to for countries like Zambia to ensure that only sustainable economic debt was contracted.
“We have also observed a notable increase in indirect or contingent liabilities on central Governments, a phenomenon which has created a new dimension to debt management.
Added to this, there is an increase in ‘unconventional financing options’, which provide alternative financing sources of fiscal risks for central Governments which we must be aware of and guard against,” Mr Mvunga said.
He said this during the seventh debt management facility stakeholders’ forum in Lusaka recently.
Mr Mvunga said most commodity exporting countries like Zambia have experienced an increase in the debt to Gross Domestic Product (GDP) ratios of their foreign denominated debt. This has also pushed up the debt service costs.