Government has attributed the volatility of the Kwacha to reduced export earnings as a result of the falling copper prices on the international market, high liquidity in the market and speculation by the market players.
And Government has indicated that it intends to minimize on the rate of borrowing both domestic and external in the near future for the betterment of the country’s economy.
Speaking during a joint Zambian Government and International Monetary Fund (IMF) press briefing in Lusaka today, Secretary to the Treasury Fredson Yamba says the Bank of Zambia has taken measures to address these issues by limiting liquidity in the market and encouraging big market players to conduct their business in more responsible manner.
Mr. Yamba says government will continue to encourage diversification of the economy to expand the export base towards manufacturing, tourism, agriculture and value addition particularly in the mining sector and construction.
Mr. Yamba says an IMF team from the United States of America led by Byung Jang has been in the country since May 27th to review economic developments and discuss the macroeconomic framework with the Zambian authorities.
He states that Zambia’s growth prospects remain positive and strong and that government has projected that real domestic product growth in 2014 will be around 6.5 percent driven by positive growth in agriculture in the preceding farming season, pick up in mining activities, manufacturing, construction and energy services.
On the External Sector Development, Mr. Yamba says the challenge in the sector is the volatility of the Kwacha and the fluctuations in the prices of metals on the international market.
Speaking during the same briefing, IMF Representative, Byung Jang, observed that the recent steep depreciation of the Kwacha is raising inflationary pressures and that expansionary fiscal policy has created large budgetary imbalances.
“The recent steep depreciation of the Kwacha is raising inflationary pressure and expansionary fiscal policy has created large budgetary imbalance,” Mr Jang said.
Mr. Jang notes that rebasing of the national accounts has revealed that the economy is 20 to 25 percent larger than the earlier estimated growth which is projected to remain strong at 6.5 percent in 2014 and the medium term outlook is supported by ongoing expansion in copper production.
He states that the Bank of Zambia has already substantially tightened monetary policy in response to exchange rate developments and to address rising inflation, including raising its policy rate and reserve requirements for banks.
He adds that the Zambian government has indicated strong determination to ensure that the fiscal deficit does not go beyond the budgeted 5.2 percent of rebased GDP in 2014 and is reduced to 3 percent of GDP over the medium term.
boza;;;;;;;;;; mismanagement that s what it is and all the borrowing and the unneccesary trips abroad and around the world; we are not all uneducated you know;
so this ka sudden kwacha gain in value against the dollar was because IMF was in town? hahahahahah…. but PF govt has issues mwe,,,,,! am waiting to see kwacha vs dollar on tuesday next week
as usual, there is nothing new or innovative from these rascals, same rhetoric all the time. what can come out of these chaps who think like lizards, they just think of today but can not see beyond their noses, perhaps their noses are too big replacing their brains
Kwacha devaluation = Political uncertainty + poor economic out look
where;
political uncertainty = selective justice and political intolerance.
Poor economic out look = poor economic management + reckless spending + corruption.
There you have it in the simplest form.
And the person behind all this is SATA, the man of IRRESPONSIBLE AND VIOLENT ACTION.
He doesn’t know what he is taking about
You forgot to say Thanks.
He said government will now reduce excessive borrowing.HH and other stakeholders warned the pf on this trend but the useless VP and dull ministers said HH was bitter.How many advice has HH and other opposition parties have been heard by the pf administration?,zero but by the end of the day HH has been proven Right on many Economic signs of the future of Zambia.he might not be a rhetoric leader but his understanding of economic management is way up than all the ministers in pf.Zambians lets learn to use our brains when it comes to serious matters of our nation.pf policies are not working.lets try another party.
Its really laughable with these arrogant empty tins, they talk of diversification in speeches but in reality its a whole different matter; they are busy selling wildlife land to mining infestors, wasting money on a huge civil service wage bill etc.
Spot on Jay Jay.
PF and Coach David Moyes are both Negative record breakers.
One of the most stu pid/unreasoned statement i have ever head from a policy maker. The amounts of exports are sufficient to bring down the exchange rate to much lower levels. What is lacking, which much be corrected is investor and exporter confidence in the direction of the economy. Currently, the economy is being run like a public toilet or indeed a bowl for villagers to spit in …..that has no cleaner, no one taking responsibility except own interest. I suggest the entire management team of the economy, starting from the head of state, MoF minister and central bank and secretary to the treasury as a custodian of our sources either take charge to restore confidence or be retired in public interest.
Foreign individuals and multi nationals are undermining our economy through various unsound (legal or otherwise) business practices and Zambians are cheering them on. This nonsense of depending too much on investor confidence should be stopped with immediate effect. Foreigners and their investments are important but should only supplement our efforts. Countries like Israel are ever under a threat of war and they don’t have the natural resources that we have but are still prosperous.
hahahahahahaha! the devil hates the kwacha,,,, so the devil is also undermining the zambian economy!
Take your time to scrutinise the internal politics in Israel as well as policies on health, education (science & technology) and international support. Definitely the ST understands the issues of why the exchange rate has continued to favour foreign currencies. It is not just the imbalance in international trade. Politics has more to do with it.
The same factors Yamba is talking about happened sometime during the reign of MMD but the kwacha was very stable, which means that the cancer is within the PF.
And why should Yamba and IMF address hold a press conference to address the state of the Nation instead of the Head of Sate?
So basically, what Mr Yamba is saying is that the PF do not seem to clearly think through some of the major policy decisions they have been making of late. One of the first things the Govt did on being elected was to ask banks to raise their minimum capital, reduce the reserve ratio and push down the cost of borrowing. No one thought through the implications of these measures. On top of this, we embarked on major infrastructure development (a good thing), coupled with an increase in the size of govt (new districts etc), which was a bad thing. On top of that, there were a bunch of reckless statements coming from most Govt officials upon assuming power. Any economist worth his salt saw the impact of these issues from a mile off. For the PF to be shocked shows they do not understand EC101
that is very prudent statement in all
You have *****ic villagers running the country who don’t even have a modicum of understanding of complex economic dynamics.These folks can’t even run a kantemba profitably thats why they’re in govt to live off the public purse thru lies.
You suprise me with your feeble economics.You want the kwacha to be at par with the dollar then what will be your export power.Remember what Ndola went through all the companies were striped.Why ? Because the Kwacha was too high .Zamefa products are too expensive why? Because people that claim to be economists like HH don’t understand trade of currence.Japan’s yuan is lower than our kwacha (deliberately)why?Zambians please start thinking don’t just leave east road cumpus and start vying for plot 1 no.
” You want the kwacha to be at par with the dollar then what will be your export power. ”
The high price of copper. Or do you want to compete with other countries for low wages? Low wages only benefit foreign corporations, so they can maximize the amount of value they take out of the economy.
Investigate how China, South Korea and Japan grew – check out the books by prof. Ha-Joon Chang, like Bad Samaritans, Taking Back Development, and 23 Things They Don’t Tell You About Capitalism. Prof. Chang is a Reader at Cambridge University, if you need degrees.
Google: “ha joon chang” cambridge
Google: “ha joon chang” review
@ eyes
How on Earth you can compare Japan economy which has been export oriented for more than 50 years with Zambian economy? Are you nuts or simply arm-chair economic ignorant?
It is like comparing freedom of expression in Zambia with Denmark.
Also, how about stimulating some demand within the economy?
Higher wages, work projects, infrastructure projects.
And the state can print up extra Kwachas and lend them out at low rates to small businesses. You don’t need the IMF for that. If the IMF wants the government to devalue the Kwacha, why not devalue it in a way that helps the economy, rather than steel people’s savings by stealing their currency’s purchasing power.
Well said MrK.
One problem. Which sector of the Economy in Zambia can afford higher wages after taking in to consideration hundreds of tax demands, cost of transport, fuel, electricity, low educational standards, cost of medical care, low productivity, hundreds of contradictory S.I., lack of sustainable fiscal policy, constant Government incompetent meddling in the all aspects of economy, lack of rule of law, constant breaches of mandatory provisions of International Treaties……………..
Bottom line, you sound like Hon. Chikwanda. No sense of purpose, no sense of direction!!!
” One problem. Which sector of the Economy in Zambia can afford higher wages ”
Higher wages will be more than offset by higher demand. Higher wages means more disposable income, more goods and services are bought.
The problem with neoliberal economics, is that it pushes the supply side of the economy above all else, even to the point of destroying demand.
When you have much of the population earning $1,- per day, high wages are not the problem.
@ MrK
Can you spell “inflation”?
Higher wages = higher inflation.
It looks like you have already forgotten populist decision to increase minimum wages? Where is gone that “extra” purchasing power? To feed collapsing value of Kwacha? Or to feed increasing cost of goods?
” Can you spell “inflation”? Higher wages = higher inflation. ”
There are different kinds of inflation. I like to separate them into productive inflation, and destructive inflation.
If you would hand out low or no interest loans to local entrepreneurs, while at the same time raising wages, you are going to see a boom in the economy, because higher production will be met with higher demand, which will be met with higher production.
If you simply print money to pay off debt, that is inflationary in a way that does not put anything back in the economy.
Right now, we are seeing inflation because hard currency is fleeing the economy, from the mining sector.
Just stopping that externalisation will cause relative deflation.
Also, the IMF/World Bank routinely induce massive inflation, through currency devaluation.
They demanded the currency devaluation of the Malawi Kwacha, for instance, which increased consumer prices.
Right now they are inflating the EU, the US stock markets, etc. through ‘Quantitative Easing’, which means they are handing over trillions of dollars to the banks to make them good for the bets they took. That doesn’t put productivity back into the economy at all.
So, if we’re going to see inflation anyway, let’s get something out of it – like a healthy economy, that works for the people who actually live in the country, not ‘foreign investors’.
I would pull the ZRA off watching the mines, by introducing a windfall tax, which effectively taxes the mines at the point of production.
I would rather have ZRA people checking on imported goods, when those goods are produced in Zambia itself. Import Substitution.
Putting an emphasis on locally produced goods over imported goods would increase employment, reduce foreign currency requirements, and keep money circulating in the economy, while building skills for local producers and suppliers.
That would actually help the economy, rather than importing cheap goods from China, which is what everyone is doing right now.
The Kolwestans have failed in their family forest to run the economy