Zambia’s finance minister presented to parliament on Wednesday a proposal to almost double the country’s external debt limit to 60 billion kwacha ($8.19 billion), as a way to fund a widening budget deficit.
The budget deficit is now expected to swell to 20 billion kwacha by the end of 2015, minister Alexander Chikwanda told parliament. It was projected at 8.5 billion kwacha when the current budget was formulated.
Chikwanda said he needed to raise the ceiling for external borrowing to 60 billion kwacha from the current 35 billion kwacha to invest in infrastructure projects and institutions that support small and medium enterprises.
“Zambia’s development momentum should not be choked by lack of resources to sustain project financing,” Chikwanda said.
The government wanted to borrow externally rather than domestically because it was cheaper and it wanted to avoid crowding out the private sector with high interest rates, he said.
Zambia’s external debt stands at $4.8 billion, about 18.5 percent of the gross domestic product, and domestic debt at $3.7 billion, about 14.2 percent of GDP, he said.
The proposal attracted fierce criticism from opposition members of parliament. A former finance minister, Situmbeko Musokotwane, said Zambia risked falling back into heavy indebtedness if the government did not control its borrowing. ($1 = 7.3300 Zambian kwachas) (Reporting by Chris Mfula; Editing by Larry King)