Higher Growth Needed, Central Bank Holds Rates
Last week Minister of Finance Dr Bwalya Ng’andu projected that the economy is expected to grow by 3% in 2020, after revising down 2019 figures from 4% to 2%. However, economist Chibamba Kanyama has cautioned that this level of growth is insufficient and will have a limited impact on the economy. Instead Kanyama advised that a growth rate closer to 7% is required.
“A growth rate is an additional wealth that a country creates every year above the previous season. It has a direct relationship on the size of the national budget as well as direct revenues by the Zambia Revenue Authority. When we consider the amount of money that remains when government services its debts and pays salaries for civil servants (10 per cent to be realistic), only a high growth rate we previously enjoyed 10 years ago of around seven per cent can provide government enough change to meet all other national needs,” Kanyama has stated.
The Zambia Tax Platform (ZTP) has also raised concerns regarding the projections, which the group claims provides evidence that “Zambia will not achieve its vision by 2030 if significant adjustments are not made.”
The ZTP has advised that the government needs to revise its investment strategy and work to unlock potential for stimulating the economy in additional areas such as agriculture. The group further cautioned government on the reduction in grants by cooperating partners. A statement from ZTP Coordinator Ibrahim Kamara and Chairperson Leah Mitaba reads, “Government may need to undertake a serious introspection to understand the reasons behind low disbursements on grants from cooperating partners. This is critical as most of these resources are meant to support social sectors.”
Zambia enjoyed strong growth between 2003 and 2010 when rates varied between 6.9% and 10.3%. Since 2013 the rates have remained at 5% or under.
Kanyama’s warning comes as the Central Bank opted to hold the benchmark lending rate at 11.5% on Wednesday, citing slow economic growth and a substantial fiscal deficit. Commenting on the decision Governor Denny Kalyalya pointed to slow progress in austerity measures, calling for “effective and sustained implementation of fiscal adjustment measures.”
Kalyalya stated that current levels of debt are not sustainable. “It’s not the expectation that tomorrow or this year we will get to debt sustainability. The point is that we must work out a path that will deliver sustainability,” he told media.
