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 an analysis
of Zambia’s current debt with its implications on educational and economic development and
thereafter a conclusion will be drawn.

Economics is the study of how society allocates scarce resources and goods. Resources are
the inputs that society uses to produce output, called goods. 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. Economic development according to Kindleberger and Herrick
(1958) is 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. On the other hand, Educational development
is about the continuous professional and personal growth of faculty members, and the
ongoing evolution of teaching and learning across the entire university. It is both theory and
practice, both a discipline and a profession and both with clarity and uncertainty.

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 US$12
billion as of November 2020. These debt levels according to CUTs International 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 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,
2020).

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).

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 will
increase significantly. High debt servicing costs weaken 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.

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. Higher taxes threaten to increase
the cost of living on individuals, push low-income earners into poverty, and also slow down
economic growth if 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
Zambians suffering.

Education provision is suffering from a lack of funding due to the fact that a larger proportion
of the budget allocation is shifted towards debt servicing. The teacher to pupil ratio has
remained high with an average ratio of 1 teacher to 60 pupils and there is limited access to
teaching aids and support infrastructure such as desks. Governments may have to continue
charging or introduce school fees, spend less on improving educational infrastructure or
construction of new schools, textbooks and equipment, and cut back on training and paying
the teachers on whom education systems rely. Teacher shortages are particularly bad in some
debt burdened countries. For instance, in the Republic of Congo, which pays around $600m a
year on debts to the rich world, there is one teacher to every 140 children. School fees keep
many children – especially girls – out of school. Poor infrastructure means that children are
crammed into overcrowded buildings, often without desks, making learning almost
impossible and contributing to very high drop-out rates. Around

The health sector is under-resourced, with most rural health centres and clinics not having
medical doctors and support staff such as pharmacy technologists, lab technicians and
midwives. Also, support for farmers has fallen due to a lack of extension officers: the ratio of
these officers to farmers is as high as 1 to 1,200 in some areas, three times the ideal of 1 to
400. This lack of investment is hindering Zambia’s development as the country needs a well-
educated, healthy and productive population to prosper.