Proposed Debt Swap Framework for Civil Servants in Zambia (for Public Debate).

Proposed Debt Swap Framework for Civil Servants in Zambia (for Public Debate).
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“The proposed Debt Swap Programme is not a bailout and must not create a new fiscal burden.” – SCC.
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Background and Problem Statement

Zambia’s civil service remains the backbone of public service delivery. However, a growing number of civil servants are trapped in unsustainable personal debt, largely driven by high-interest loans from commercial banks and microfinance institutions tied to payroll deductions.

In many cases, civil servants take home little to nothing after statutory deductions and loan repayments. Some payslips show zero or negative net pay, undermining morale, productivity, family stability, and ultimately the quality of public service delivery.

This situation is no longer a private financial matter. It constitutes a systemic risk to public administration, workforce efficiency, and national development.

Policy Objective

The Proposed Debt Swap Framework for Civil Servants seeks to:

(a) Restore the financial dignity and productivity of civil servants

(b) Reduce exposure to predatory lending and excessive interest rates

(c) Stabilise household incomes while maintaining fiscal discipline

(d) Improve public service delivery by reducing financial stress in the public sector

Proposed Policy Proposal: Civil Servants Debt Swap Framework

We propose that Government introduces a structured, voluntary Debt Swap Programme, guided by the following principles:

1. Proposed Consolidation and Refinancing of Existing Debt

It is proposed that Government, through a designated financial vehicle, such as a state-backed facility or approved partner banks, shall buy out or refinance existing high-interest loans owed by civil servants to commercial banks and microfinance institutions.

These obligations shall be consolidated into a single loan facility with transparent terms, eliminating multiple deductions, overlapping repayments, and opaque charges. The objective is to replace fragmented, high-cost debt with one affordable, predictable, and manageable repayment structure.

2. Lower Interest Rates and Longer Repayment Periods

Under the Debt Swap Framework, refinanced loans shall be issued at concessionary interest rates, significantly below prevailing commercial and microfinance rates. These rates must reflect the low-risk nature of payroll-deducted lending, rather than profit-maximising margins.

Repayment periods shall be extended to medium- and long-term tenures, calibrated to civil servants’ income levels, in order to ensure affordability and sustainability. This structure aims to rebalance debt servicing in a way that guarantees:

(a) A reasonable and predictable take-home pay

(b) Reduced monthly repayment pressure

(c) Improved household financial stability

(d) Lower default risk within the payroll lending system

Crucially, this framework recognises that financial relief is not achieved through loan forgiveness, but through fair pricing of credit and realistic repayment horizons aligned with income realities.

3. Payroll-Based Repayment with Safeguards

Loan repayments shall continue through payroll deductions to preserve discipline and recovery certainty. However, deductions shall be capped by policy, ensuring that no participating civil servant falls below a defined minimum net-pay threshold.

This safeguard protects workers’ dignity and productivity while maintaining the integrity and sustainability of the lending system.

4. Eligibility and Targeting

The programme shall be voluntary and targeted, with priority given to:

(a) Lower- and middle-income civil servants

(b) Teachers, health workers, and frontline service providers

Clear eligibility criteria will ensure the intervention is focused on relief and stability, not indiscriminate expansion of credit.

5. Financial Literacy and Borrowing Controls

To prevent recurrence, the proposed Debt Swap Programme shall be accompanied by:

(a) Mandatory financial literacy and debt management programmes

(b) Stronger regulation of payroll-based lending

(c) Borrowing limits linked to net income, not gross salary

This ensures that relief is durable and that systemic weaknesses are addressed.

Fiscal Responsibility and Risk Management

The proposed Debt Swap Programme is not a bailout and must not create a new fiscal burden.

(a) Government DOES NOT ABSORB PRIVATE DEBT; rather, it facilitates refinancing and restructuring

(b) Private lenders are paid, but excessive interest margins are curtailed

(c) The framework should be cost-neutral or self-financing over time

Expected Outcomes

If properly implemented, the proposed policy will:

(a) Increase civil servants’ net take-home pay

(b) Improve morale, focus, and productivity

(c) Reduce absenteeism and moonlighting

(d) Strengthen public service delivery

(e) Stabilise household economies and reduce social stress

Conclusion

Civil servants cannot deliver national development while trapped in perpetual debt. A well-designed Debt Swap Framework offers a balanced, disciplined, and sustainable solution, one that protects workers, maintains fiscal responsibility, and restores dignity to public service.

This proposed policy is not about handouts. It is about systemic reform, fairness, and sustainability. This is important to do because a productive civil service is a prerequisite for a productive nation.

Yours Truly,

Hon Sunday Chanda – MP
Kanchibiya Constituency

Note:

This discussion is not about politics. It is about identifying and implementing sustainable solutions.