Globally, recessions due to Covid-19 have run havoc and the impact on the Zambian economy has led to a full-blown economic crisis. High Inflation and debt repayments have been hard-hitting, businesses have shut down; investment spending has been cut and people have lost work. Dr. Ngandu Zambian Minister of Finance confirmed that Zambia defaulted on a 42.5 million Euro Bond coupon payment in November 2020 after lenders refused to give the government a moratorium.
As a response to this crisis, President Lungu launched the Economic Recovery Program 2020-2023 (ERP) that is focused on restoring growth, safeguarding livelihoods through macro-economic stability, economic diversification, and debt sustainability. This economic meltdown presents a rare opportunity for Zambia to reset and rebuild its economy-based green investment pathways. This approach for Zambia provides an opportunity to deliver green growth, green jobs while securing the very ecosystems that support the economy. What Covid19 taught us is that we cannot choose economy over health, without paying. Similarly, we cannot make economic recovery decisions that disregard the environment without paying.
Why transition to a green economy?
Because a degraded planet is not good for anyone and not good for any business. Our current economic model that runs highly on carbon destroys the environment and hence not sustainable. Overlooking the current high trends of nature loss will be more catastrophic for Zambia’s development agenda. The landmark decision by the UN Member States last month to include the contributions of nature to future calculations of GDP is a strategic move. This implies that the Zambia ERP goals should move the country towards a green and inclusive economic recovery that unlocks opportunities for many Zambians. With low financial reserves, natural capital stocks, well managed could be the pillar for the ailing economy to rebound.
In the last 10 years, Zambia emitted 125 million tonnes of carbon, climate change has, in turn, cost the economy between US$4-7 Billion in the last 10 years and plunged more people into poverty. In the face of both crises, promoting a green approach will generate growth and jobs without destroying the natural capital base upon which the economy depends. A green economy is defined as low carbon, resource-efficient, and socially inclusive. This shift will not only support economic recovery but deal with major environmental degradation the country faces such as deforestation, climate change, and pollution.. To mitigate these costs, businesses and communities, have to actively help stop rapid environmental degradation and contribute to the de-carbonization of the Zambian economy.
Possible initiatives to Green Zambia’s Economic Recovery Plan?
With deliberate public policies to attract large-scale nature-based investments, governments can relaunch the economy sustainably. Under the ERP, the option of Debt for Nature Swaps can also be used to contribute towards the reduction of Sovereign debt distress. These are deals Zambia can negotiate with its creditors to channel investments in activities that can restore nature, generate green growth, and reduce debt defaults. The deal allows the country to swap making external dollar debt payments on eligible debt, for making payments in local currency to nature restoration and climate adaptation projects based on agreed terms. Nearly 30 countries have used these Debt swaps since the 1980s to provide more than USD 1billion to protect the environment.
WWF Zambia and its partners are driving landscape-based green bankable investments through the Dutch Fund for Climate and Development (DFCD ). Eligible projects have to be private sector-led and have to help save degrading landscapes. Essentially, green funds will flow to projects in Zambia that deliver the commercial, social and environmental returns.
Lastly riding on the Covid19 bond, launching green bonds can support ERP sustainable growth and job targets. Proceeds from these green bonds would be used to promote economic diversification goals by investing in COVID19 bond marginalized sectors central to sustainable recoveries, such as climate-resilient agriculture, eco-tourism, and sustainable forestry.
As a way of bringing businesses on board, there is a need for government to consider a tax system that will encourage supply chains to reduce their emissions and support the maintenance of key environmental services that support their businesses and drive the economy. This tax would be a boost to the Zambian treasury.
The call to go green is about the survival of economies, companies, communities, and landscapes. It’s thus imperative for leadership in the public sector and private sectors to lead the green reforms. Lack of bold action on climate change will lead to another 6% reduction in the size of the economy – that will lead to more lost opportunities and livelihoods. A green economic agenda will not only offer Zambia a secure and sustainable future but will make the country less vulnerable to the next crisis coming.