World Bank calls for ZESCO reforms to boost profitability, creditworthiness

The World Bank has urged ZESCO to adopt key cost-effective reforms essential for the company’s improved profitability, liquidity, and creditworthiness.

These reforms, according to the bank’s Public Finance Review published in Lusaka this month, are crucial in making ZESCO an attractive partner for private sector investment in Zambia’s power industry.

The call aligned with findings from a 2019 cost-of-service study, which also emphasized the need for these changes.

Among the recommendations, the World Bank highlighted the need to increase ZESCO’s export revenues and restructure its short-term liabilities into long-term debt.

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This move, the bank said, would help ZESCO clear its balance-of-trade payables and lower its debt-to-equity ratio.

These steps are vital in preparing Zambia’s power sector for greater private sector involvement and ensuring its long-term sustainability.

Additionally, the World Bank stressed the importance of improving ZESCO’s revenue collection mechanisms, particularly from the mining sector, which accounts for the largest share of receivables.

It called for a detailed analysis to identify revenue leakages and the implementation of targeted strategies to enhance collections.

To further strengthen ZESCO’s financial position, the bank recommended the introduction of cost-reflective tariffs.

This would prevent the utility from importing power at high rates and selling it to consumers at lower prices.

However, the World Bank emphasized the need to protect Zambia’s poor population by maintaining lifeline tariffs and offering subsidies for connection fees to low-income households.

The report underscored the necessity of these reforms in transforming ZESCO into a more sustainable and competitive player in the region’s energy market.

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