Crisis-hit Zambia slashes spending
ZAMBIA’S President Edgar Lungu unveiled a raft of spending cuts ranging from reduced fuel subsidies to delayed road building as the country’s economic crisis intensified.
The government will have spent $300-million (R4.3-billion) on subsidising fuel for consumers by the end of the year, which is “clearly not sustainable”, Lungu told reporters in Lusaka this week.
A further $40-million will have been paid to import power and ease a severe shortage between September and the end of the year, underscoring the need for the energy regulator to increase prices, he said.
Lungu ordered officials not to start any new road projects, to defer construction contracts and focus instead on completing those already under way. He has also been delaying the establishment of a national airline, which had been set to take place next year.
Plunging copper prices and a severe power shortage are straining Zambia’s economy, which will grow by the slowest pace since 1998, according to the World Bank.
A ballooning budget deficit is also contributing to the crunch, the International Monetary Fund said last week. Zambia has been compelled to cut spending as revenues shrink and costs escalate due to a more than 40% depreciation in its currency this year, Lungu said.
“In taking these measures, I note that it will not be easy for many of our citizens.
“However, these are necessary actions required to bring us back to a path of economic stability,” he said on the lawns of State House on Thursday.
Zambia has spent billions of dollars developing roads since Michael Sata’s Patriotic Front won power in 2011, consuming more than 10% of the budgets for 2015 and 2016. Lungu took office in January after Sata died three months earlier.
The government expects the budget deficit to swell to 6.9% of GDP this year from a targeted 4.6%, while Barclays forecasts it will reach 8.4%. The 2016 target is 3.8%. Inflation accelerated to 19.5% in November, the highest level in more than a decade, the Central Statistical Office said earlier on Thursday.
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