Budget performance

GOVERNMENT says inflation has remained relatively stable within the target range of 6-8 percent in the first half of 2018.

And Minister of Finance Margaret Mwanakatwe has said that external debt stock as at end-June 2018 was US$9.4 billion, representing 34.7 percent of GDP from US$8.7 billion as at end-December 2017. Speaking during her maiden budget presentation of the 2019 to the National Assembly in Lusaka yesterday, Ms Mwanakatwe said the policy rate was reduced to 9.75 percent in May 2018 from 12.5 percent in November 2017. “Inflation is 7.9 percent in September 2018 from 6.1 percent in December 2017. Food inflation was the key driver of the increase and was recorded at 8.6 percent in September 2018 compared to 4.8 percent in December 2017,” she said. She said over the same period, the statutory reserve ratio was reduced to 5.0 percent from 8.0 percent adding that non-food inflation reduced to 7.3 percent from 7.5 percent. Ms Mwanakatwe also said implementation of monetary and supervisory policies by the Bank of Zambia continued to focus on containing inflation within the target band of 6-8 percent, strengthening the resilience of the financial sector and supporting economic activity. “Sir, the stock of domestic debt in the form of Government securities amounted to K51.9 billion as at end June 2018 representing 19.2 percent of GDP, compared to K48.4 billion as at end-December 2017. Domestic arrears amounted to K13.9 billion by end-March 2018 from K12.7 billion as at end December 2017,” she stated. Consequently, she said, the budget deficit was estimated at 7.4 percent of GDP against the target of 6.1 percent. On debt Position, Ms Mwanakatwe said Government’s external debt stock as at end-June 2018 was US$9.4 billion, representing 34.7 percent of GDP from US$8.7 billion as at end-December 2017. She explained that the increase was on account of disbursements on existing loans and that the total stock of Government guaranteed debt stood at US$1.2 billion as at end-June 2018. The Minister said the overall revenue and grants for 2018 were expected to be broadly in line with the 2018 Budget projections. She, however, said expenditures were projected to be higher on account of higher interest payments and project loan disbursements. “Mr. Speaker, following the easing of monetary policy, lending rates declined to an average of 23.5 percent in August 2018 from an average of 26.7 percent in December 2017.

“These rates, however, remain too high to support private sector growth. Consequently, domestic credit to the private sector remained relatively subdued, with growth of 6.7 percent during the year to August 2018. Nonperforming loans, at 11.9 percent as at end-August 2018, remained above the prudential threshold of 10 percent,’ she said. She said Government has been concerned with the high cost of most financial services which has been on straining business expansion as well as financial inclusion. To address this, she explained, the Bank of Zambia, in August 2018, issued directives to do away with unwarranted bank charges and fees. “Mr. Speaker, in an effort to strengthen the legal framework for credit provision, the Credit Reporting Act was enacted in July 2018, ” Ms Mwanakatwe said.