An Analysis of the Legal Framework for Public Debt Management in Zambia
Zambia’s current legal framework for public debt management is inadequate. The high level of external debt standing at US$11.2 billion and domestic debt at K80.2 billion due to fast pace of debt contraction; the resulting heightened risk of debt distress; and the weak implementation of the 2017-2019 Medium Term Debt Strategy (MTDS), raise questions on the adequacy of the laws that govern public debt management. Now more than ever, with Zambia quickly headed to its first bullet repayment on its Eurobond debt, the country needs to enhance its legal framework on Public Debt Management (PDM). Before 2011, the country borrowed almost entirely from bilateral and multilateral lenders such as the World Bank; then the existing legal frameworks were appropriate With the ushering in of commercial borrowing, from 2012, and the growing complexity of the debt portfolio, there is need for a revision in the public debt laws to adapt them to the changing circumstances. Zambia’s legal framework for public debt management adopts an internationally recognised maze of laws, and draws authority from different levels including the supranational, regional and locally drafted laws. The Loans and Guarantees (Authorisation) Act (LGAA) as the main subsidiary legislation on debt, nonetheless, remains ineffectual on several requirements and procedures necessary to effect prudent debt management. The mandate to borrow on behalf of the State is well elucidated in the Amended Constitution, the LGAA and the Public Financial Management (PFM) Act. But there is a discrepancy between the LGAA and the Constitution – which is the Supreme Law of the Land – on who has the, final authority in debt contraction. Article 62 (2) (d) of the Constitution grants final authority of loan authorisation to the National Assembly. Nevertheless, Section 3 of the LGAA vests power in the Minister to “… raise loans from time to time, in the Republic and elsewhere, on behalf of the Government”. The LGAA only provides for the National Assembly to broadly authorise debt ceilings. Clearly, this is not the spirit in which the Constitution was enacted and does not uphold the separation of powers in the contraction and approval of debt.