Economist Shabdin Mweemba has criticized the continued decline in private sector credit growth which sharply diminished amidst rising government borrowing through securities.
According to the latest statistics by the Bank of Zambia, private sector lending only grew at a rate of 29.7% year-on-year in September, down from 35.8% in June due to reduced economic activity amid government increased borrowing.
In an interview with Phoenix News, Mr Mweemba says the shift in credit allocation from the private sector to government securities could stifle Zambia’s economic momentum, as businesses increasingly face challenges accessing financing.
Mr Mweemba is of the view that the declining credit growth in the private sector is a signal of a contraction in economic activities, with many businesses potentially delaying expansion plans, deferring new investments, and reducing operational capacities.
He explains that with less access to financing, Small- and Medium-Sized Enterprises -SMEs-could be particularly affected, struggling to cover operating expenses or reinvest in their businesses.
He says while government borrowing can help meet short-term fiscal needs and fund essential infrastructure projects, over-reliance on domestic borrowing could crowd out the private sector by absorbing liquidity that would otherwise be available for business loans.
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