IMF Executive Directors have commended the Zambian authorities for their sound macroeconomic management and welcomed Zambia’s strong economic performance in recent years. This is contained in a press release made available to the media by the Ministry of Finance.
According to the statement the IMF Directors noted that while the outlook for the economy is favorable, it is subject to risks arising from volatility of copper prices and delays in implementing measures needed to meet the 2012 budget deficit target. To safeguard macroeconomic stability and to make growth more inclusive, they stressed the need for continued commitment to strong policies and implementation of structural reforms.
Directors agreed that fiscal policy should aim at prioritizing growth enhancing expenditures and mobilizing revenues to create the space needed to achieve the fiscal objectives. They emphasized the importance of implementing reforms to maize marketing and pricing, fertilizer subsidies, and public sector pension funds.[pullquote]They emphasized the importance of implementing reforms to maize marketing and pricing, fertilizer subsidies, and public sector pension funds[/pullquote].
These measures should help restore fiscal sustainability and correct market distortions that have created overdependence on maize production. Directors noted that revenue enhancing measures, including strengthening tax administration and reducing subsidies and incentives will also be critical for achieving the fiscal targets. In addition, the reinstatement of the automatic petroleum price adjustment mechanism and the implementation of the multiyear electricity tariff framework are needed to minimize fiscal risks associated with the current pricing below cost recovery.
Directors underscored that public financial management reforms are essential to improve budgetary planning and execution and prioritizing spending. They welcomed the plan to complete the implementation of the Treasury Single Account and urged the authorities to continue to strengthen their investment and debt management capacity. These measures would support the planned scaling up of infrastructure spending and increased use of non-concessional financing.[pullquote]They welcomed the plan to complete the implementation of the Treasury Single Account and urged the authorities to continue to strengthen their investment and debt management capacity[/pullquote]
Directors endorsed the plans to further enhance the monetary policy framework in support of a low inflation objective. They encouraged the authorities to remain vigilant to inflationary pressures and tighten policy if needed. Directors agreed that the introduction of the monetary policy rate, combined with use of a broad set of economic indicators to assess the monetary policy stance, should make monetary policy more flexible and forward looking and enhance liquidity management.
Directors noted that the flexible exchange rate regime has helped Zambia weather external shocks. They highlighted that increasing the reserve coverage would also provide an added buffer.
Directors welcomed the authorities’ efforts to strengthen the financial sector and improve access to financial services. They urged the authorities, however, to work closely with key stakeholders to minimize any risks to the financial sector stemming from the implementation of the new minimum capital requirement for commercial banks and the redenomination of the local currency.
Directors emphasized that structural reforms will be critical to achieve economic diversification and make growth more inclusive, in order to tackle the high rate of poverty and unemployment. In this context, they encouraged the authorities to formulate a broad based reform strategy for the agriculture sector, and to strengthen formal sector development, in particular by improving the business climate[pullquote]In this context, they encouraged the authorities to formulate a broad based reform strategy for the agriculture sector, and to strengthen formal sector development, in particular by improving the business climate[/pullquote]
Zambia has achieved high and sustained growth and macroeconomic stability over the past decade, but poverty remains high. Real gross domestic product (GDP) growth averaged 5.2 percent in 2000–10 (or 3.1 percent per capita); inflation declined from 30 percent to single digits; debt declined sharply; and international reserves increased to comfortable levels.
Economic conditions remain favorable and there has been little impact to date from the European crisis. Real GDP growth is estimated to have been strong in 2011, driven by a record maize harvest and strong expansion in bank credit, which has surpassed pre-crisis (2008–09) levels. Inflation continued to decline, broadly in line with the authorities’ target of 7 percent.
Despite copper prices rising to record highs, the external current account surplus narrowed significantly, mainly reflecting a strong expansion in imports and a decline in grants. However, gross international reserves rose above $2 billion for the first time, equivalent to 3 months of prospective imports.
Preliminary data suggest that the fiscal deficit of the central government remained flat at around 3 percent of GDP in 2011, as a large expansion in election-related spending was offset by a one-off payment of mining tax arrears.[pullquote]Preliminary data suggest that the fiscal deficit of the central government remained flat at around 3 percent of GDP in 2011, as a large expansion in election-related spending was offset by a one-off payment of mining tax arrears[/pullquote]
In 2012, real GDP is projected to rise by 7.7 percent, reflecting strong growth in copper production and non-maize agriculture, and an expansionary fiscal policy. The 2012 budget targets a deficit of 4.1 percent of GDP and a significant increase in investment. More than half of budget financing is expected to come from a US$500 million sovereign bond issue, and net domestic financing is targeted to remain low at about 1 percent of GDP. Inflation is projected to remain close to its current level of around 6 percent in 2012.
The Bank of Zambia (BOZ) recently changed its monetary policy framework from reserve money targeting to the use of a policy rate as the main monetary policy tool.
the key word is past years and not months. This talks about MMD and not PF…So MMD must have done a good job….
In recent years OHHHH!!! listen now OHHH!
Don’t bother listening to these crap projections! The guys making a forecast about our economic outlook are in some foreign land, seated in a New York , London office… and they have never been to Zambia, blogges about Zambia’s economy. This is not the 1970s,80s and 90s when you blundered our economy with your westernised conditions imposed on ‘third world’ countries. WE don’t need you ( IMF and World Bank). The Chinese will tell us about our economic outlook!
Sort your western financial crisis first…
are you truely mr tembo, you lack of knowledge suggest otherwise. you dont like IMF,Wordbank or CSO(zambia) so you want as to trust what you say. or what the president says. both of you are not experts
Am realising now that the MMD, bad as they were had some kind of plan on how to manage and grow our economy. Their character was bad and they lost touch with the masses and deserved to be kicked out of office
But these PF guys do not even have a plan. Not even a bad one. They are totally clueless
SHUT UP YOU MORON
@ Pinto, telling someone to “shut up” on the internet (!) only makes you look like the moron. If you disagree with TBD, far better to explain what the PF’s plan actually is….. or maybe you don’t have much to say about that?
If PF has not put in place meausure to maintain sound economic performance, negative results would have been seen by now. PF is doing excellent Job considering that they took over from a corrupt gvt. As for world bank, be advised that we are now looking to the east for loans. Very soon Islamic banking will also take its position and developing countries will soon have a wide choice to peak from. !O!
Kwekwe your thinking is painful to say the least. i wonder how old you are. as for the effect of PF we will be able to feel them when they divert from the way MMD was running the economy. let them start fulfilling their manifesto full of free things that is when we will feel PF. so for now you are right they are doing well walking in MMD policies. your world bank comments should be left alone
Fiscal policy blur blur blur..??!!! These are the same guys who cheated us into privatising everything in order to grow the economy or what ever. Now look were we are. We can only boast about economic fundamentals and all that jazz, but on the ground there is massive unemployment and poverty. In the mean time they are busy stealing our god given wealth like copper using the so called investors and we just watch. Their only investiment is the same machinery they use to dig our copper which will wear out by the time they done stealing the copper. Atleast in the past they used to built townships like nkana east and west, hospitals, schools etc.
When the Brentwood institutions are happy, it means the country is now in the hands of the NWO.
Investors know that it will only take them a short time to mine the same copper they used to mine in say, 50 years because of imprved technology and equipment. Thats why they are not intereted in developing our country. They are not here to stay. They will only leave us with giant holes in the ground and a degraded envirolment. Oh, i forgot the machinery which will be fit for scrap by then!
# 3…I conquor with you!! these chaps want to be talking about our economy whe they have never been to Zambia….and we have been so dull that we even listen to them.they have been impossing a number of things on us bt we have been dying of hunger.these are stupid chaps…we dont need them.
do you need i need to go to RSA to know how well organised their economy is.
“IMF Executive Directors have commended the Zambian authorities for their sound macroeconomic management and welcomed Zambia’s strong economic performance in RECENT YEARS”. This kind of statement will not go down well with Hons Lubinda, Shamenda and like fellas, they are denied the fun of bad mouthing the “previous government of MMD”. What’s wrong with these IMF chaps?
Pafwaka’s only plan is to reintroduce kaundaist socialism .
Real gross domestic product (GDP) growth averaged 5.2 percent in 2000–10 (or 3.1 percent per capita); inflation declined from 30 percent to single digits; debt declined sharply; and international reserves increased to comfortable levels.
THIS WILL BE THE LEGACY OF MMD. i am sorry it hurts
was believing the title and liking it until I got to the part that said IMF.
no one knows whats going on in the world today..everyone is just guessing and hoping their right… this is the same language on every tv station. its now over 4yrs when the markets collapsed and at the moment these IMF prophets of doom have no clue on which side to turn..is it staying with africa or teaming up with china..tighten ur belts..there will be no mines left when they finish with us..maybe we should start thinking of investing in solar energy at least they won’t come and take the sun away.