THE UNIVERSITY OF ZAMBIA

SCHOOL OF EDUCATION

DEPARTMENT OF EDUCATIONAL ADMININISTRATION AND POLICY

EAP: 9075 INTRODUCTION TO ECONOMICS OF EDUCATION

NAME: MOONO MUNA

COMPUTER NUMBER: 2017007160

COURSE CODE: EAP 9075

LECTURER: DR. TOMMIE NJOBVU

TASK: ASSIGNMENT 1

DUE DATE: 16th APRIL, 2021.

QUESTION: Discuss the Economics of Zambia’s Current Debt and its implication on both
economic and education development.
External debt is one of the sources of financing capital formation in any economy.

Developing countries like Zambia are characterized by inadequate internal capital formation

due to the vicious circle of low productivity, low income, and low savings. Therefore, this

situation calls for technical, managerial, and financial support from Western countries to

bridge the resource gap. External debt however, acts as a major constraint to capital

formation in developing nations. The burden and dynamics of external debt show that they do

not contribute significantly to financing economic development in developing countries. In

most cases, debt accumulates because of the servicing requirements. In this view, external

debt becomes self-perpetuating mechanism of poverty aggravation, work over-exploitation,

and a constraint on development in developing economies. This essay therefore, attempts to

discuss the economics of Zambia’s current debt status and what this implies in as much as

economic and educational development is concerned. Key terms such as Economics,

Economic development and Educational development will be defined followed by a

discussion of Zambia’s current debt with its implications on educational and economic

development and thereafter a conclusion will be drawn.

Economics according to Samuelson and Nordhaus, is the study of how people and society

choose, with or without the use of money, to employ scarce productive resources which could

have alternative uses, to produce various commodities over time and distribute them for

consumption now and in the future among various persons and groups of society. Resources

include inputs such as labour, capital, and land. Goods include products such as food,

clothing, and housing as well as services such as those provided by barbers, doctors, and

police officers. These resources and goods are considered scarce because of society's

tendency to demand more resources and goods than are available. Educational development

is about facilitating positive change in teaching and learning in schools at the individual,

program/department and institutional levels. It is about helping these institutions function as

Kindleberger and Herrick defined Economic development as a process where low-income

national economies are transformed into modern industrial economies. It involves qualitative

and quantitative improvements in a country’s economy. Political and social transformations

are also included in the concept of economic development in addition to economic changes

(Johnson, 1994).

Zambia has recorded a dramatic increase in external debt over the past decade. In 2011, total

debt was recorded at US$3.5 billion, in March 2018, rose to US$14.4 billion and now the

current debt as of November 2020 is US$12 billion. These debt levels are rather alarming. It

has been almost one year since the IMF declared Zambia at high risk of debt distress, and

during this time debt has risen significantly. Coronavirus on the other hand has aggravated

pre-existing financial pressures not just in the country but in many other highly indebted

countries worldwide. The pandemic has put an additional burden on health services and

depressed economic activity and the government of Zambia has stated that this has been the

cause of its difficulties. The country after missing payment of over US$40m in November

2020, requested for a delay to interest payment putting her at a risk of debt default (BBC,

2021).

High debt levels leave Zambia in a very difficult position. A lot of the country’s debt is

contracted in foreign currency, which means if the kwacha weakens due to external factors,

such as the copper price falling unexpectedly, the amount that Zambia owes in real terms

increases significantly. High debt servicing costs have weakened the economy by forcing the

government to spend money on interest payments when it should be spending on national

development. Health, education, social protection are just three areas, which are significantly

impacted, as money spent on interest cannot be spent on these sectors. Lack of investment in

these services has a long-term impact on the social well-being of Zambians. High debt levels
also leave the Government unable to pay its obligations to companies and contractors who

have been engaged for various development projects (CUTS international, 2019).

It is arguable that Zambia’s debt has not been spent in a way that has increased growth but

has become a burden on the economy. Debt servicing is Zambia’s biggest budget

expenditure, accounting for almost 32.6% of the country’s GDP in 2021 (PMRC).

Reorganising national debt therefore is necessary if Government is to free up funds to reduce

poverty and improve livelihoods, and have an opportunity to seek a funding package from the

International Monetary Fund (IMF). As debt levels are increasing the Government needs to

increase its revenue in order to provide public services and also pay back its debt. The

Government does this through taxation and charging fees to raise revenues domestically and

reduce its reliance on borrowing. However, taxes need to be raised fairly as there is a risk of

stagnating private sector-led growth and squeezing ordinary Zambians into poverty by

leaving them with little money to meet their basic needs. Within the last three years a number

of taxes and fees have been imposed, such as the borehole tax, increased toll gates for

motorists. Higher taxes have led to an increase in the cost of living on individuals, pushed

low-income earners into poverty, and also slowed down economic growth due to the fact that

individuals have less money for consumption of goods and services. While government needs

to improve revenue to pay off its debt, poorly executed taxation policies threaten to derail the

government’s ability to raise money, as well as leave ordinary Zambian’s suffering ("PMRC

2021 ZAMBIA NATIONAL BUDGET ANALYSIS", 2020).

Having looked at the economics of Zambia’s current debt, the are several implications this

has on education and economic development. The much-witnessed deteriorating prospects for

economic growth have far-reaching implications for education financing. Education provision

is negatively affected from a lack of funding due to the fact that a larger proportion of the

budget allocation is shifted towards debt servicing (BBC, 2021). Despite the high teacher to
pupil ratio with an average ratio of 1 teacher to 60 pupils in most schools, the country has

over 50,000 teacher graduates waiting for deployment. The government is unable to deploy

more than 3000 per year due to the huge insufficient budget allocation on education sector.

Another implication is the limitedness in access to teaching aids and support infrastructure

such as desks especially in rural schools. Poor infrastructure means that children are crammed

into overcrowded buildings, often without desks, making learning almost impossible and this

consequently leads to high drop-out rates especially at primary level. High levels of

government expenditure on debt servicing implies that less money is left to improve the

quality of public services (Clark & Allison, 1989). This exerts pressure on key budgeted

activities due to the need to redirect resources to debt repayment.

In every developing country, good quality education and proper healthcare are necessary to

build a productive workforce that is driven towards poverty alleviation and help bring about

economic development. The impact of the cost of servicing the country’s debt is reducing

social spending, which will negatively affect each and every individual, especially the poorest

in the society. There is, therefore, need to recognise the importance of social spending and

regulate it from cuts to protect the poorest in society and drive the country towards economic

development (CUTS international, 2019).

In conclusion, this essay has briefly highlighted and defined key terms which are economics,

economic development and educational development. Thereafter, an overview of the

country’s debt accumulation over the last three years putting into perspective the impact of

the resent coronavirus pandemic in the country and world at large. The essay has also

discussed how the debt has affected the Zambian economy in terms debt servicing and how

this has affected the education and economic development of the country.
References

BBC News. 2021. Zambia on brink of defaulting on foreign debt. [online] Available at:
<https://www.bbc.com/news/world-africa-54928836> [Accessed 6 April 2021].

Clark, J., & Allison, C. (1989). Zambia. Oxford, UK: Oxfam.

CUTS International. (2019). Understanding the Impact of Zambia’s Growing Debt on

Johnson, T. (1994). The Dimensions of Regional Economic Development Theory. Review of

Paul, Samuelson, William, Nordhaus. (1985). Economics (Twelfth edition Ed.12). New

PMRC 2021 ZAMBIA NATIONAL BUDGET ANALYSIS. (2020). Retrieved 2 April 2021,
from https://pmrczambia.com/wp-content/uploads/2020/10/Analysis-2021-Zambia-National-
Budget.pdf