Zambia must implement fiscal adjustment measures to brake escalating debts: Expert

Authorities in Zambia must implement effective fiscal adjustment measures at the earlier to put fiscal deficits, debt levels and debt service payments on a sustainable path, a local think-tank said on May 27.

"This is the only way to restore both domestic and international investor confidence. Government should engage in extensive consultations with technocrats, private sector player and international institutions in order to find remedial and long-term solutions to the current economic situation," the Center for Trade Policy Dialogue, a trade policy and development think-tank said in a release.

It added that the poverty levels are likely to increase if fiscal corrective measures are not urgently implemented following revelations by the central bank last week that the country's economic performance has continued to deteriorate on account of fiscal pressures limiting monetary policy interventions. Last week, the central bank increased its benchmark interest rate by 50 basis points to 10.25 percent from 9.75 percent in a move aimed at controlling inflationary pressures, as reported by Xinhua.

The bank's monetary policy committee said in a statement that it decided to raise the policy rate after indications show that inflation was projected to breach the upper bound of the 6-8 percent target range over the forecast horizon due to heightened upside risks. The think-tank further revealed that the statement portrays a gloomy picture of the state of the economy, adding that an increase in inflation, coupled with exchange rate deprecation will further increase Zambia's economic performance.

"During these hard economic times, citizens need to know that the prices of goods and services are likely to go up as inflation breach the 8 percent limit." "The only glimmer of hope is that the Bank of Zambia has proactively stepped up in confronting the economic challenges on the monetary side, this is commendable," it further added, Xinhua noted.

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