Zambia is among Africa’s fastest growing economies and for the last few years its economic performance has continued to be positive, registering the Gross Domestic Product (GDP) growth rates of 6.8 per cent in 2011 and 7.3 per cent in 2012, for instance.
The rate of inflation has remained within the single-digit bracket and last month rose to seven per cent from 6.9 per cent in October 2013 according to the Central Statistical Office (CSO) latest data.
Generally, the international economic bodies like the International Monetary Fund (IMF), the World Bank and World Economic Forum (WEF) are happy with strides the Government and the private sector are making in meeting some of the benchmarks.
Within the year 2013, the WEF named Zambia as the continent’s number seven most competitive economy.
An IMF team which visited Lusaka during September 17-24 period to conclude the 2013 Article IV Consultation discussions with Zambia praised the Government for the country’s economy.
Under Article IV of the IMF’s Articles of Agreement, the IMF usually holds bilateral discussions with its member countries, every year.
The team said that the Zambian economy has continued to expand at a rapid pace with overall output growth projected to reduce in 2013 from 7.2 per cent in 2012 to six per cent under the current national budget
The 1.2-per cent reduction is attributable to lower agricultural production.
The yield for maize, the country’s staple food for instance, has gone down from 2.7 million tonnes recorded in the 2011/2012 farming season to 2.5 million tonnes in 2012/2013.
This reduction is partly for the poor rainfall distribution, especially in southern, eastern, Lusaka and central provinces and the army worms which raided some fields during the season.
In a statement, the IMF team had noted the continued increase in Zambia’s copper production amid the lowering prices of the commodity at the international market.
There is, however, need for the Zambian authorities to heed to the team’s advice on how to resolve the various challenges haunting the economy.
These major economic challenges are in fiscal area hence the need for the Government and spending agencies to adhere to fiscal discipline to ensure that the rest of the budget is executed prudentially.
As noted by the IMF team, the Government expenditure in the 2013 National Budget will be considerably above the budget due to various factors including the removal of fuel subsidies incurred before the removal in May 2013.
Other factors are the newly-effected increased salaries for civil servants as well as the costs related to the running of and debts by the Food Reserve Agency.
The Government has a shortfall in revenue on the projected figures.
On aggregate the budget deficit for 2013 is now expected to rise to about 8.5 per cent of GDP as opposed to about five per cent it usually hovers around.
To remedy the situation, the Government is in the 2014 National Budget expected to introduce measures to increase revenue and tighten expenditure controls.
With a combination of stepped-up revenue collection and tight expenditure control, the draft budget aims to bring the deficit to about five per cent of GDP, similar to what was originally planned for 2013.
The IMF advises that, to maintain strong economic growth, it will also be important to safeguard competitiveness and build bumpers against external shocks.
For the increase in the salaries for civil servants which were effected this year to remain economically meaningful there should be a corresponding rise in production and productivity by the workers.
The workers, therefore, have to ensure that they earn (work for) their salaries so that they could help in maintaining or even increasing the competitiveness.
Last year’s (2012) sharp increase in minimum wages and this year’s large pay award to civil servants are putting upward pressure on labour costs in both the private and the public sectors.
The IMF Executive Board is expected to complete the 2013 Article IV consultation in late November or early December 2013.
On the same issue, Zambia’s Secretary to the Treasury Fredson Yamba said the Government has set out an extensive capital expenditure programme aimed at increasing investment in education, health, transport, energy, water and sanitation as well as social safety net.
These projects are an important prerequisite in achieving meaningful economic growth, poverty reduction and social justice.
According to Mr Yamba, there would be a divergence from the over-reliance on the mining sector to the other areas of comparative advantage such as manufacturing, tourism, agriculture and agro-processing to ensure that growth was broad based and inclusive.
The 2013 fiscal deficit was unavoidable as Government had to clear the backlog of arrears on fuel and maize subsidies as well as higher wage bills.
By and large, the Zambian economy seems to be in mixed blessing having scored some successes amid some failures.
As a way forward, the broad medium term goals of the economic policy for Zambia should be to maintain strong growth, lowering the budget deficit and keeping hold of low inflation rate to ensure stability in the prices of commodities locally.