Q FM Africa's Modern Radio
The Zambia Institute for Policy Analysis and Research (ZIPAR) has welcomed the establishment of a sinking fund for repaying the US$750 million and US$1 billion Eurobonds government issued on the international capital market.
ZIPAR however thinks that the traditional view is that the sinking fund should be adopted only in the case of a government revenue surplus.
ZIPAR Researcher Shebo Nalishebo says his institute does not foresee surplus revenue being attained any time soon in Zambia.
Mr. Nalishebo has Qfm News that this entails that a small part of the current revenue receipts need to be earmarked for this fund even in the context of government deficits.
He states that ZIPAR is of the view that once set up, the level of funding to the sinking fund could be scaled up in the medium term after the high fiscal deficit is reduced and some fiscal space created.
Mr. Nalishebo notes that if these measures are put in place, they will lower the repayment risk besides signaling to bondholders that Zambia does want to default on the debt.
He says lowering of the repayment risk would also translate into a lower interest rate on future borrowings.