MINISTRY OF FINANCE
ECONOMIC FACTSHEET – JANUARY 20, 2014
DEVELOPMENTS IN THE ECONOMY
Economic growth positive in 2013 – but higher growth and greater job creation will require continued investment in economic infrastructure as well as health and education
1. In 2013 real GDP was K125.9 billion compared to K106 billion in 2012. GDP growth in 2013 was 6.5%, with average real growth over the past three years (2011 – 2013) of 6.9%.
2. Key contributors to real GDP growth in 2013 were: transport, storage and communications (27.1%); construction (24%); community, social and personal services (17.4%); financial institutions and insurance (13.7%); manufacturing (8.2%); and mining (5%).
3. Investment in the economy (Gross Fixed Capital Formation) is currently estimated at 29.7% of GDP in 2013, with average investment over the past three years (2011 – 2013) of 27.1%.
4. Agriculture, mining, manufacturing, tourism, energy and construction set to be major drivers of GDP growth and job creation over the medium to long term.
FISCAL POLICY AND THE BUDGET
Expansionary fiscal budget largely aimed at infrastructure development necessary to sustain high levels of economic growth over the medium term. Higher deficit in 2013 reflected structural reforms related to management of strategic reserves (FRA), oil procurement (fuel subsidies), and reform of the public service (wage award).
1. Preliminary data indicates that in 2013 the budget deficit was approximately 6.7% of GDP, compared to the target of 4.3% of GDP. However, this was significantly below the figure of 8.6% of GDP which was initially forecast by the IMF.
2. Average budget deficit over the past three years (2011 – 2013) stood at a relatively low figure of 3.3% of GDP.
3. Domestic revenues estimated at 20% of GDP in 2013.
4. Expenditures were 26.7% of GDP in 2013, with wages and salaries at approximately 9.5% GDP and Government investment at 6.0% of GDP.
5. Government is committed to reducing fiscal deficit to no more than 3% of GDP over the medium term. This should be possible as Zambia achieves higher growth and greater tax revenues from the mining and other sectors sector as production increases.
DEBT POLICY
Government is mindful of the need to maintain debt sustainability to safeguard macroeconomic stability.
1. Total debt as a percentage of GDP stood at 28% in 2013.
2. External debt stood at US $3.1 billion 2013 or 13.7% of GDP, whilst domestic debt stood at K17.6 billion or approximately 14% of GDP.
3. External and domestic debt levels remain below their international thresholds of 40% and 25%, respectively.
4. Debt service (principal and interest payments) stood at K11 billion or 1.2% of GDP (and approximately 6% of domestic revenue) in 2013.
MONETARY POLICY
Monetary policy remains committed to delivering low inflation and a strong financial sector that continues to expand access to finance particularly to SMEs. Increasing attention is also being paid to improving consumer protection and strengthening corporate governance standards.
1. Inflation remains in single digits at 7% in 2013, and goal is to reduce this to no more than 5% by end 2016.
2. Average lending rates have stabilised around 16%.
3. Private sector credit grew by approximately 16.2% on an annual basis (as at November 2013).
4. Financial sector has been strengthened with new capital requirements, and the banking system remains profitable
5. Access to financial services, particularly for SMEs remains a challenge, but significant progress being made in improving the payment systems as well as ways of spreading financial service provision through branchless banking.
6. Government has supported provision of longer term finance by channelling more resources through DBZ and the CEEC.
EXTERNAL SECTOR DEVELOPMENTS
Current account and trade balance remain positive with strong FDI flows. But declines in trade balance in recent past reflect need to promote greater NTEs by diversifying the export base. Agriculture, energy and manufacturing sectors are going to be important sources of diversification over the medium to long term.
1. In 2013 the current account balance recorded a surplus of US $216 million or 1% of GDP.
2. The trade balance (goods) also recorded a surplus of US $ 1.4 billion or 6% of GDP. Both the current account and the trade balance have been positive between 2011 and 2013.
3. In 2013, mining sector exports are estimated to have grown by 13% to US $10.4 billion, whilst NTEs grew by 23% to US $3.3 billion.
4. Import growth has also been strong at 16.5% in 2013, driven by both strong FDI flows as well as incentives in the budget for job creating sectors which included customs duty reductions.
5. Capital and intermediate goods continue to account for over 50% of all imports.
6. The nominal exchange rate (Kwacha versus the US Dollar) remains market determined and depreciated by an annual average rate of approximately 4.2% in 2013.
7. Government committed to maintaining a flexible and open exchange rate regime – with stronger monitoring of external flows so that we can better manage the economy and respond to any global financial shocks.
CONCLUSION
Zambia needs to achieve higher levels of economic growth to make meaningful headway in creating decent jobs and reducing poverty and inequality. Government remains committed to maintaining macroeconomic stability characterised by low inflation, stable exchange rate, rising international reserves, and expansion in access to credit particularly for SMEs.
Real economic growth of between 7%-8% targeted over the medium term (2014 – 2016)
Budget deficits are expected to be consolidated towards a lower figure of 3% of GDP in the medium term. Revenues are projected to rise to 23% of GDP by 2016.
Inflation targeted to decline to no more than 5% by 2016.
External debt will remain sustainable and well below the threshold of 40% of GDP.
Improving access to financial services as well as achieving better health and education outcomes critical in making meaningful progress in reduction of poverty and inequality
Can somebody who has seen the line which state how much is in the Foreign Reserve please tell me. This number seem to have been silently damned down. I need to know because as MMD we inherited empty coffers and over $2.5 billion in reserves and I wanna know what level that money is at.
cant see it either but in the briefing yesterday it was mentioned!
Thanks Joe Mwansa, what was the figure mentioned yesterday in the briefing?
CORRECTION @MMD Bootlicker- we inherited empty coffers and left over $US3b in reserves,a sustainable lower wage bill,bumper harvests and a stampede of foreign investors coming in.
@MMD chief bootlicker. We cant continue wallowing in reserves without tangible growth on the ground. Its like a villager with 50 herds of cattle, who is condemned to live in a ramshackle forever and cant even buy himself a decent pair of pants. Come on guys, lets move on!
They said USD2.4b
@ Ba Licker,
Am always keen on reading your posts and I must say they are most of the times spot on which makes me wonder why you are outside the ring and not on the inside for Zambia would make good use of you!
My only concern right now is the comparison between what did and what did not…. I would believe whenever am presented with a challenge,my results should never be determined by the past attachment though a good mirror to project the out come. I never like looking back after all is said and done, for me it’s like an excuse or some kind of “crooked” pride. State out what could offer better results and faults that could be avoided in order to speer head Development, for when GZR achieve better results, it is for everyone and when they fail, I guess you know what that means.
@ Ba chief Licker,
What’s the secret that led MMD to do better than PF in some areas? Maybe it’s time we started offering tactical ideas through blogging hoping some minister will get something positive. I was just thinking the other day how Zambia is lacking behind not because Government has failed but because we have all contributed to its failure! Imagine all the knowlege you have on certain projects en that from HH like stipulated in one of the articles today, just imagine all the brains blogging day in day out with countless strong positive ideas and solutions if brought forward and acted upon…. picture how far we could go! In short all am saying is, maybe it’s time we took matters into our own hands and help develop this country, otherwise, we will always stand at the same…
@Cindy. I like your objectivity on this issue. I wish as Africans/black people we could use the power of the internet to improve our lot in terms sharing knowledge instead of using it just as a social networking platform and other trivialities. MMD appeared to do well in terms statistics like single digit inflation and what not, mainly because of debt cancellation which was spearheaded by Catholics through jubilee something … Bootlicker is intelligent but he is misusing his intelligence.
May I seek clarification: on item 2, contributors to real GDP, mining is 5% and transport, storage(of what?) and communication is 27%. But in item 4, this WONT contribute to job creation and driver of economy? See what is on item 4 =Agriculture, mining, manufacturing, tourism, energy and construction set to be major drivers of GDP growth and job creation over the medium to long term.
2. GDP was said on some facebook to be 7% now 6.5. Why do we have various stats from Govt?
Good show GRZ.
This PF sharks are painting a rosy picture because most of their followers are riffraffs too uneducated to disect the hidden traps.Our debt has grown,our deficits got larger,our wage bill has balooned,our trade surplus has shrank given the much stronger import growth,our bumper harvests gone and our economy is mainly in foreign hands.Whats there for the riffraffs? Even the IMF is sending warning signals.
@Tumbuka pride: Please give us counter-stats to backup you assertions! If NOT then we will take the “rosy picture” above as facts. Generalizations and rants are not that helpful, are they?
As for “our economy is mainly in foreign hands,” well, do you even know who put our economy in foreign hands? Or you simply conveniently forgot what the MMD did to local industries/companies with their zealous privatization exercise. This Govt (PF Govt) suggests to create IDC/ZIMCO to once again spearhead home-grown corporations, and guess who is against that too, yes, folks like you in MMD!
You may call this PF Govt and its supporters as a bunch of “riffraffs” and “Kaponyas”, but they seem to be more practical with the Zambian developmental agenda than MMD Govt ever was.
@Yambayamba
Please refer to another story on LT suggesting that “despite Govt singing praises on the IG’s report….” That will give you an alternative set of statistics of what is really happening to our economy. But even there, the Govt is singing its own praises despite the obvious. Therefore why should anyone believe these set of figures, that have not been independently verified, as true gospel on the state of our economy? With the IG report in mind one should easily digest that the INDECO project will simply add to the IG’s report on stolen money. Govts do not run successful business…but should be focused on public services. Especially in countries like Zambia under PF where politician are in it for their bellies.
Bwana @it’s a worry…fimo fimo: What does the IG REPORT got to do with ECONOMIC STATS? Or you are simply those people who love to pick quarrel for quarrel’s sake?
Look, you may have issues with the current Govt, like most of us do, but that shouldn’t blind us from seeing facts when they are presented to us. Why should any sane person trust SPECULATIONS coming from people like you than at least give a benefit of the doubt to numbers given by people charged with this responsibility?
By the way, how do you know these figures were NOT VARIFIED by relevant Govt entities before release? And who do U suppose should verify economic stats in Zambia? Opposition political parties? Health skepticism is always good, but I think it has just gotten out of control in Zambia at the moment!
@Yambayamba
I am not one to just just pick quarrels for quarrels sake and the Auditor Generals report has everything to do with the economic health check of the nation. Unless of course you are telling me that corruption has no bearing on the well-being of a nations economy? If it has then clearly is not being quarrelsome but taking Govt statistics with, not just a “pinch of salt” but a handful since this Govt is attempted to “gloss over” FACTS that indicated a rise in corruption through the Auditors report. And that is the very reason any sane person should “Take into account” our speculations. My deeper worry is reading your comments and suggestions that “Government entities” can verify such statistics independently. That can’t happen and it will be very naive of you to…
@it’s a worry…fimo fimo:
My question is who is constitutionally responsible for PREPARING and VERIFYING economic stats in Zambia? Other than the ministry of finance and its proxies, who else is charged with this responsibility in our system of government? Sure, it is a noble wish that some independent body outside govt should verify such stats, but that is just a WISH. Constitutionally this is the duty of the govt of the day—whether we dislike, believe, trust, etc., the govt in power.
Through appointed ministries or departments that’s how economic stats are done the world over! You have the right to dispute or not believe the stats, but that does not mean we should start asking for things to be done in a manner that has no Constitutional backing whatsoever!
BRIEF REPORT…
ONE THEREFORE EXPECTS SHADOW REPS ON ECONOMICS & FINANCE FROM THE OPPOSITION TO COME FORWARD WITH COUNTER ECONOMIC DATASHEETS …. PERIOD!
External debt stood at US $3.1 billion 2013 or 13.7% of GDP, whilst domestic debt stood at K17.6 billion or approximately 14% of GDP. what nonsense is this ?? This government is a govt of debt ,they borrow left ,right and centre…the figure above is not a true reflection on what is obtaining on the ground….we campaigned aggressively for debt cancellation not too long ago but this PF govt has taken us 6 yrs backward.
By 2016 inflation will be in double figures..not 6% pipe dream
@illuminist ‘&”: Against what borrowing thresholds should these %s be judged? I think all that info is clearly stated in the factsheet above. Yet you choose to simply jump over that, right?
Projections given in this brief are both realistic and achievable ,We are all for the good of the country and perhaps the best is for us to provide checks and balances to the executive and hold them accountable should all of this fail to materialize.
In all honesty they are now leading the way in being open and discussing with the citizenry all these issues .Even the Facebook page is a great tool that the head of state can address issues and this will help in the communications gap that African politics had for a while .Keep it coming PF and where we see wrong we shall point out.
I should say today I like what I see, this is what I asked for in my previous post, if we have such information, we can monitor Government well. All in all it seems work is being done, lets see how 2014 will shape up, show us something by June!
It is good to spend than keep money around. The civil servants were building big houses during MMD era because money was lying around to steal.
How do you target a budget deficit is that okay. some one teach me
we need to be serious us a country with our mining sector! 10 billion dollars worth of exports and what do we collect in taxes from that? less than a billion dollars and a believe not even close to eat. if this is the way we shall proceed posterity will judge us harshly
ECONOMIC FACTSHEET – JANUARY 20, 2014
These facts are incomplete and omits unemployment stats which is one of the key measures of macroeconomic performance.This is the only measure that affects ordinary people directly and translates into food on their table,but successive governments since independence have either paid lips service or did not know how to analyse data. So in 2013 we should have been informed as follow:
1. Number of unemployed and employed at the start of the year in absolute terms
2.The unemployment rate at the start of the year
3.Jobs added during the year
4.Participation rate
5.Number of unemployed and employed at year end
6.Unemployment rate at year end
7. Components of the unemployment number-Structural,frictional,seasonal and cyclical at the year end