Finance Minister Felix Mutati has said that Government will soon introduce the Loans and Guarantees Act to ensure that debt sustainability becomes a guiding principle before embarking on new infrastructure projects. He said the Act will enhance government transparency and accountability in the contraction of debt, saying that previously Government committed to borrowing to fill the infrastructure deficit.
Addressing investors in Washington during the 2017 IMF/World Bank Annual meetings, Mr. Mutati said, for this reason, Government has embarked on the publication of a quarterly debt statistical bulletin and annual debt report to inform stakeholders about Zambia’s debt situation. This is contained in the Debt Management Strategy for 2017-2019 released by the Ministry of Finance. The strategy provides information for investors and other market participants, on the objectives of debt management pursued by the Government.
The Finance Minister also revealed that Government will introduce the Public Investment Management System where projects will be appraised for their contribution to economic growth. Other reforms in the financial sector include the Banking Act, Depositor Guarantees Bill, Insurance Act, among others. He said this will enhance transparency and accountability of government in the contraction of debt. Other reforms include the Banking Act, Depositor Guarantees Bill, Insurance Act, among others.
Mr. Mutati attributed the transparency in managing the economy and running affairs of the country to President Edgar Lungu’s consistent and timely guidance. He lauded the President’s immense value of wisdom and guidance on the need for sound, tested and sustainable financial and economic management practices of the country.
The Minister said in the medium-term strategy government will complete ongoing projects before embarking on new ones while getting a balance between infrastructure spending and debt sustainability. He assured investors that Zambia’s macroeconomic fundamentals are stable for investment and Government has managed to stabilize the exchange rate and reduced inflation rate as of August to 6.3 percent while reserves stand at 2.4 Billion Kwacha.
“Zambia’s trade surplus has remained positive, standing at US$ 833 billion as of the end of June and that the interplay of fiscal policy has had an effect of easing monetary policy to the extent that the reserve ratio now down to 9.5 percent while policy rate is around 11 percent,” he said, adding that Government is working towards further reducing interest rates which currently are soaring around 20 percent.
Mr. Mutati urged investors not to underplay the key policy decisions and structural reforms that Government has undertaken which have brought out stability and positive outlook of the Zambian economy. “In the mining sector which is a key contributor to the country’s Growth Domestic Product (GDP), Government has implemented a stable tax regime, while in agriculture we have removed the export bans and opened exports,” he said.
The Finance Minister outlined other key strategies including; The Food Reserve Agency (FRA) to purchase maize from 1.6 million tonnes to half a million tonnes. Government has managed to save about US$ 100 million following the introduction of the E-Voucher payment system to farmers by moving away from the fertilizer input support programme; In the energy sector, Zambia has shifted from predominantly providing subsidies for the tariffs to cost-reflective tariffs which will result in saving close to US$ 300 million this year noting that Government will remain focused on fiscal consolidation both on the expenditure side and implement critical legal reforms.
“In the current sitting of parliament government will seek to change the Public Finance Act by making it more punitive to avoid abuse and misappropriation of public resources. We are also working on revising the Budget Bill to increase participation of Zambians in the budgeting process,” Mr. Mutati said.
He further said the current Zambia Procurement Act is a compliance-based Act, hence Government is moving to “value for money” which will result in saving 25 percent in terms of revenue and expenditure linkage. The Minister said 40 percent of the budget in any fiscal year goes towards procurement of services and goods.
This statement was released to the media by Cosmas Chileshe, First Secretary, Press and Public Relations
Embassy of the Republic of Zambia in the US