ZAMBIA’S FISCAL DEFICIT TO REDUCE

ZAMBIA’S fiscal deficit is projected to narrow further to 6.5 percent in 2019. Bank of Zambia (BOZ) Governor Dr Denny Kalyalya said the fiscal deficit, on cash basis for 2018 was estimated at around 7.0 percent of Gross Domestic Product (GDP) against the budget target of 6.1 percent and the actual outturn of 7.8 of GDP in 2017.

Dr Kalyalya said this during a media briefing in Lusaka.

“However, as reflected in the Ministry of Finance, domestic arrears rose to K14.7 billion in June 2018 from K13.9 billion in March 2018,” he said.

Dr Kalyalya explained that speedy and effective implementation of the austerity measures and strict adherence to the 2019 Budget were necessary to moderate the pressure on Government financing.

He said this would also address private sector liquidity challenges, debt distress, inflationary pressure pressures and threats to the stability of the financial sector. Dr Kalyalya said the positive growth which the global economy had continued to register was expected to support Zambia’s copper export earnings.

“The global economy continued to register positive growth anchored on strong growth in the United States, and is projected to grow by 3.7 percent in both 2018 and 2019 from 3.9 percent in 2017.

“This growth momentum, and in particular the continued growth of Chinese economy, is expected to support copper prices and Zambia’s copper export earnings. However, downside risks associated with trade wars and uncertainties surrounding Brexit have heightened over the medium-term,” Dr Kalyalya said.

Dr Kalyalya further said decision to maintain the policy rate would continue to be guided by inflation forecasts and outcomes as well as progress in the execution of fiscal consolidation measures.

“Should the heightened risks to inflation materialise, an upward adjustment in the policy rate may be necessary to prevent inflation from persistently staying above the target range,” he said.

Monetary policy is the process by which the BoZ controls either the cost of short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the Kwacha.