Zambia raised its 2007 annual inflation target to 9 percent from 5 percent and said it expected lower inflation of 7 percent in 2008, the Treasury said last week.
However, Finance and National Planning Minister Ng’andu Magande said the inflation could still drop to the 5 percent level for 2007 if the Kwacha continued to strengthen.
“Most of the weight on inflation comes from food and if the Kwacha appreciates then it will have an impact as people will import more goods which will (further) lower prices,” he said at the launch of the Treasury’s Medium Term Expenditure Framework.
Zambia revised its growth forecasts for this year to 7 percent from 6.2 percent and will sustain this level of economic performance for the next three years, the Treasury said.
It would target a fiscal deficit of less than 1.2 percent of Gross Domestic Product for 2007 and 2008 and 1.0 percent in 2009 and 2010.
The treasury said the deficit of about K952 billion from its proposed 12.8 trillion Kwacha national budget in 2008 would be financed through domestic borrowing, with only a portion sourced from donors.
The bulk of government spending of $3.3 billion would go to education, health and infrastructure such as roads, bridges, clinics and schools, in line with its plans to become a middle-income country by 2030.
The government would target new growth opportunities and diversify exports in agriculture, manufacturing and tourism sectors, the MTEF said.
Despite faster economic growth of an average 5.6 percent in the last three years about two-thirds of the population still live in poverty, the Treasury said. REUTERS
