The International Monetary Fund has revised Zambia’s real GDP growth to 5.5 percent in 2014 due to declining copper production and the depreciation of the Kwacha in the first half of the year.
In a statement issued shortly after an IMF mission led by Tsidi Tsikata visited Zambia during December 4-18, the IMF said technical outages at some mines led to a decline in copper production.
Mr Tsikata said a marked tightening of monetary policy and a boost to international reserves from Eurobond proceeds helped to partially reverse the depreciation and stabilize the exchange rate although the annual rate of inflation edged up to 8.1 percent in November.
“Zambia’s growth potential remains high, but the medium-term outlook is clouded by domestic and external risks. The outlook is buoyed by several mining and electricity supply projects that are about to come on stream,’ he said.
He however warned that political and social pressures for loosening fiscal policy in the run-up to the 2016 general elections are potential sources of downside risks.
‘Moreover, lower world copper prices and the announced shift to a royalty-only mining tax regime with high rates are likely to adversely affect the mining sector. The authorities indicated that they are looking to assuage the concerns of mines and prevent closures.’
Mr Tsikata has since called for greater policy stability and consistency saying it would help anchor confidence in Zambia as an attractive investment destination.
‘In this regard, the mission urged the authorities to seek a speedy resolution to the impasse over VAT refunds to exporters. More generally, it will be important to enhance dialogue between stakeholders, particularly between government and the mining sector where there is a need to build mutual trust,’ he said.
He said effectively addressing the country’s fiscal imbalances is critical for maintaining macroeconomic stability and ensuring a strong foundation for sustained economic development.
‘Despite some progress in 2014, keeping public finances in line with approved government budgets has proved challenging, and deficit financing has put upward pressure on interest rates. In the mission’s view—based on the current international and domestic environment—the 2015 financing requirement is likely to be larger than planned,’ he said.
Mr Tsikata said the mission welcomed the authorities’ intention to take measures to keep the deficit within the budgeted level adding that such consolidation would, with time, allow for a normalization of monetary policy and a reduction in interest rates.
“After the January 20 presidential by-election, the mission team will engage the incoming government to discuss its policy intentions and priorities before submitting a report to the IMF Executive Board on the 2014 Article IV consultation,’ he said.
PF see what your visionless actions can do. Thank God HH is coming to save us. The 3 year of PF will go in history of zambia as wasted years.
These are serious matters that must be made campaign issues. The challenge is how to put it to my grandmother so that she is clear that the current leadership has so far not thought through national policies. I suppose for the moment it is enough to deliver messages that the electorate would like to hear such as street vendors won’t be chased from the streets, reverse the retiremnet age, blah blah blah. All campaigners sound like a record stuck in the grove.
All the best mother Zambia
Numbers do not lie, PF you are shrinking the Zambian economy. Project Failure (PF) you should take full responsibility for this negative outcome.
85 % of Zambians don’t understand this IMF analysis,and those are the populace who have messed up Zambia.pf is cheating you on nurses,chitimukulu.etc.GBM is the only person who has principles.
IMF is not a credible institution, so whatever it says is useless – BRICs are actually better than Britonwoods….
On the VAT refunds and paying royalties of 20% as an all in final tax, Am with the Government here.
Zambia as a country is at crossroads. It is usually the case for most of these multinational and international organisation to bring in issues of economy when the country is under political stress and make an economic gain in the process. IMF has always led Zambia into deep problems in the past and now they are at it again. Give Zambia a chance to solve ints domestic issues which is the most important concern as things stand now. If you wish move out of Zambia briefly and shall call you when we are politically settled. This time we do not need any external interfearence please, unless IMF is interested in distabilising Zambia just as it has done in other countries. I thought IMF would be talking about giving us money for our up coming by election.
@rasco, this time I do concur with you.
IMF are not looking after our interests. They want to encourage/threaten the Zambian gov’t to continue tax loss through the Mines.
We need to stick to our guns on the Mines on the VAT refunds and paying royalties of 20%.
No back down. Corporate tax must also be paid.
PLEASE STOP BORROWING…we end up being controlled like this.
Lumwana mining to be closed in march what a sand story for the nation. Hh where are u