Constraints on Public Debt Management in Zambia 1991-2004 and prospects for improved management

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Chitala, Mbita
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This work has examined constraints on public debt management in Zambia between 1991 and 2004 and suggested ways of improving it. The case study of Zambia identified five areas that impacted efficient and effective public debt management in Zambia. These were the public debt overhang, the policy environment, the management capacity, the legal and institutional framework and the influence of external aid. The study used the historical method in which a survey of the public debt problem in Zambia was conducted using library research and detailed open ended interviews of public debt managers and other relevant stakeholders. The aim was to come up with a general position on constraints of public debt management in Zambia between 1991 and 2004. The data analysis was based on both empirical and qualitative historical approaches. The central challenge of the study was the recognition that achievement and maintenance of public debt sustainability for Zambia and for any other Highly Indebted and Poor Initiative (HIPIC) country would be illusive if the country was stuck with an unsustainable public debt, poor policy framework, inadequate debt management capacity, an unsupportive legal and institutional environment, and misapplied aid or were over dependent on aid. The thesis has shown that even if Zambia was able to obtain debt relief, including outright cancellation of its external debt, the debt crisis would still resurface in future if the country continued with a public policy environment that did not address the historical necessity of implementing policies that supported expansion of exports of goods and services, lacked management capacity, had a weak legal and institutional framework that did not control wastage of public resources arising from such practices as corruption and thefts, and was still tied to foreign aid that had the tendency to perpetuate dependency and complacency in recipient countries. The study suggested that Zambia's debt overhang needed to be reduced, structural adjustment policies needed to be changed to allow for export led growth policies, management capacity of Zambia's debt managers needed to be improved, the law and institutional framework needed to be integrated and measures for compliance be instituted, and Zambia needed to adopt debt and aid exit strategies. The study results suggest an interaction of these variables.The effects of these constraints on public debt management and the possible improvements that could be made were dependent on the importance policy makers put on the necessary work of public debt management.
Debt Management