World Bank advises Zambia to contain salaries, subsidies

World Bank country Director Kundhavi Kadiresan
World Bank country Director Kundhavi Kadiresan

THE World Bank says containing the growth of expenditure on salaries and subsidies would create fiscal space for Zambia to expand coverage of targeted cash transfers and other programmes that have a solid track record of reducing poverty.

World Bank country director for Zambia, Zimbabwe and Malawi, Kundhavi Kadiresan, said the recent and current budget deficits of about six percent could destabilise the economy if sustained.
Dr Kadiresan said this at the launch of the WB brief titled: “Making mining work for Zambia: The economic, environmental and health nexus of Zambia’s copper mining”, in Lusaka yesterday.
She, however, said the current slowdown of economic growth for major developing countries in response to lower copper prices will have minimal effect on Zambia.
“The WB’s latest economic forecast shows that the global economy is continuing to move along on a path of slowly rising gross domestic product growth rates. Beneath this trend, there is a transition underway. Economic growth is slowing in China and other large developing countries in response to lower commodity prices.
“During next year, we expect some turbulence in world financial markets as this transition proceeds. During the transition, WB expects neither strong headwinds to blow Zambia from the world economy, even if we do expect some turbulence,” she said.
The World Bank brief that was launched considers issues of environmental and human health and looks at implications for licences, regulations and laws governing mining. It also analyses the country’s recent economic developments.
Dr Kadiresan said the analysis of Zambia’s mining industry encourages the country to design tax instruments and royalties that ensure fairness to Government’s share of mining proceeds, while bolstering private sector investment in production.
At the same occasion, Minister of Finance Alexander Chikwanda said Zambia remains a bankable country with the ability to pay back its debt.
Mr Chikwanda said despite the current external debt standing at US$4.8 billion and annual debt servicing at US$500 million, the country is bankable.
“Zambia still continues to be bankable and has the ability to repay debt. Come 2022, we will be able to pay back the US$750 million eurobond,” Mr Chikwanda said.
Mr Chikwanda, however, said the reduced mining volumes and low price of copper on the international market have negatively affected the foreign exchange rate.
Notwithstanding this, he said the inflation rate is expected to stay around eight percent by the end of this year.