The nation may be aware that the Government of the Republic of Zambia announced in the 2017 Budget Address that it had developed an Economic Growth and Stabilisation Programme (ESGP) called “Zambia Plus”. The Economic Stabilisation and Growth Programme is Government’s response to among other objectives, ensuring fiscal fitness and overall macroeconomic stability. This is a critical ingredient for higher and inclusive growth, wealth creation and poverty reduction.
The Economic Stabilisation and Growth Programme outlines policy and structural reforms for effective implementation of development programmes under the Seventh National Development Programme (7NDP) that will be launched soon. Some of the key areas of reform under the programme include:
Sustaining Cost Reflective Fuel Pump Prices: this reform has been significantly achieved. In order to achieve longer term sustainability, the Government is currently consulting on the framework that will guide the engagement with the private sector in the procurement of petroleum products.
Cost Reflective Electricity Tariffs: work towards a phased removal of subsidies on electricity tariffs has progressed.
Reforming of the farmer input support programme to improve targeting and minimise financial waste has significantly progressed towards full implementation of the electronic voucher system whose pilot significantly progressed in the 2016/17 farming season;
Dismantling of arrears has commenced and will be accelerated during this year. This is meant to unlock economic activity and support viability of the financial sector.
Trade Facilitation and Revenue collection enhancement: Government has commenced the development of the single window that will reduce transit times to 48 hours, implementation of the mineral value chain monitoring project and rolling out of Road Toll Sites to enhance revenue and in particular sustainably support infrastructure development. The procurement of electronic devices is also underway to improve VAT collections and adherences to receipting by business houses.
Fiscal consolidation: the Government has undertaken to ensure that the fiscal deficit is limited to levels approved by Parliament. Further, reforms on implementation of the Integrated Financial Management Information System (IFMIS), and Treasury Single Account (TSA) have progressed and will be fully implemented in 2017 to ensure strengthened commitment controls on public spending and borrowing. The Government is also making revisions to the Public Finance Act to stiffen the sanction regime, and Public Procurement Acts while the Planning and Budgeting Bill is due for presentation to Parliament to strengthen public financial management and. Further, an amendment to the Loans and Guarantees (Authorisation) Act will soon be tabled to give Parliamentary oversight on borrowing.
On monetary policy, the Government is collaborating closely with the Bank of Zambia to ensure that fiscal and monetary policies are coordinated to ensure macroeconomic stability. In this regard, the Bank of Zambia has responded to fiscal restraint and lower inflation, by commencing the normalization of monetary policy. Modernisation of financial sector laws has commenced with the passing of a new Banking and Financial Services Bill by parliament
The Economic Stabilisation and Growth Programme has so far resulted in relative stabilisation of the economy. The exchange rate is stable, investors have returned to the domestic securities market with preference for longer term instruments, inflation has returned to single digits while growth is positive at around 3%, above the Sub-Saharan African rate of 1.4% for 2016. Electricity supply is stabilizing giving impetus to economic activity, mining production that has been increasing following a dip in 2015 and agriculture sector where a bumper harvest is expected for 2016/17.
Notwithstanding these developments, risks remain on account of a deteriorated external sector position that has resulted from weak exports, high fiscal deficit and debt levels, the continued threats of climate change and fragility of the global economic growth. In addressing these threats, financing will be required. Given the high deficit and debt levels that Zambia is experiencing, external support will be required to ensure enhanced resilience and response.
In order to assure the continued success of the Economic Stabilisation and Growth Programme in addressing these risks, it is necessary that IMF supports Government’s economic programme, in particular elevating gross international reserves and providing balance of payments support. This engagement will attract more assistance from cooperating partners and boost investments.
In this regard, Cabinet at its sitting on 11th April 2017 authorised the conclusion of discussions with the IMF on its support to our home grown programme. This followed progress made in the initial programme discussion during the IMF Mission to Zambia from 8th March to 24th March 2017.
The nation may wish to note that the IMF approach has evolved from prescription to engagement. IMF programmes now emphasize ownership of programmes by countries. The IMF also emphasizes on policies that focus on social protection, inclusive growth that has potential to create jobs and reduce poverty including ring-fencing of programmes in the health and education sectors. The IMF has done away with structural conditionalities such as wage freeze as these had a negative impact on poverty.
In conclusion, I wish to inform the nation that the Government will keep the country informed on the discussions with the IMF as they progress. I further wish to assure the public that we are on course with stabilizing the economy and ensuring higher growth rates going forward.