Minister of Finance Margaret Mwanakatwe ‘s Statement on the State of Zambia Economy

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Minister of Finance Margaret Mwanakatwe
Minister of Finance Margaret Mwanakatwe

I wish to update the nation on the performance of the economy in 2017, the general outlook for 2018, and Government’s reaffirmation of the commitment to continue the implementation of policy and structural reforms aimed at sustaining the macroeconomic stability attained so far. This is in the light of recent observations and speculations on the state of the economy and on government’s engagement with various stakeholders on the economy, both local and foreign.

I take this opportunity to strongly re-affirm that the work on policy, structural, and legal reforms will continue to be implemented with more greater vigor.

2017 ECONOMIC PERFORMANCE

*GDP Growth:* Driven largely by positive performance in manufacturing, mining and agriculture sectors, GDP growth continued on a positive trajectory. Despite being positive, preliminary data shows that growth is expected to be lower at 3.7% than the above 4% earlier projected. I will update the nation on growth once the final 2017 assessment is finalised.

*Inflation:* Inflation was contained within the band of 6-8 percent that was set at the beginning of the year. End-2017 inflation closed at 6.1%, the lowest in over thirty years.

*Fiscal Performance:* Preliminary numbers show that the fiscal deficit was below the budget target of 7.0% of GDP at 6.1%. This is consistent with the fiscal consolidation policies that the Government embarked on in the year under review.

MONETARY POLICY, AND BANKING AND EXTERNAL SECTORS

Banking sector conditions continued to be sound and satisfactory. Liquidity conditions largely improved with the easing of monetary policy.

A slight reduction in lending rates was recorded at 24.6% as at end 2017 from 29.49 0% in 2016. Lending rates are still prohibitively high and posing challenges for enhanced business activities. The Government will work with the Bank of Zambia (BOZ) to institute targeted measures and engagements with the banking sector to meaningfully start to achieve lower rates in 2018.

The Kwacha remained relatively stable against the major convertible currencies. The Kwacha trade against the US Dollar in 2017 averaged K9.99 per US$. The current account deficit narrowed to US$760.3 million in 2017 from US$1.037 billion in 2016. International foreign reserves in 2017 were recorded at US$2.1 billion.

2018 ECONOMIC OUTLOOK

Economic performance in 2018 is expected to remain positive supported by a stable macroeconomic environment and implementation of various policy, structural and legal reforms under the Economic Stabilization and Growth Programme (ESGP). Growth is projected to remain positive while inflation is expected to be low and in single-digit while the fiscal deficit will be maintained within budgeted levels.

However, some of the potential risks for 2018 include relatively high lending rates and uncertain weather patterns that may impact negatively on electricity generation and agriculture activities.

POLICY, LEGAL AND STRUCTURAL REFORMS

The envisaged positive economic outlook in 2018 and the medium term will be anchored on key reforms being undertaken by Government under the ESGP. These reforms will also support the implementation of the Seventh National Development Plan.

The need to sustain economic and fiscal governance, through maintenance of price stability for sustaining macroeconomic stability and fiscal fitness is paramount and necessary ingredient for growth, employment creation and poverty reduction. In this regard fiscal and monetary policy coordination will continue to be strengthened.

Government will step-up fiscal reforms to ensure fiscal consolidation is fully attained. Government will continue to enhance domestic revenue mobilization and expenditure restraint to attain a 3% of GDP fiscal deficit by the end of the medium term. Key to expenditure restraint is to concentrate on completing ongoing projects as outlined in the ESGP and emphasized by His Excellency the President of the Republic of Zambia Mr. EDGAR CHAGWA LUNGU.

On debt management, the Government will continue to enhance debt management capacities and transparency. In this regard, the Government will prioritize the slowing down of debt accumulation and address perceptions around debt numbers by strengthening institutional and legal framework that will boost transparency in debt contraction. To this end, Government will be re-energising the engagement of stakeholders that are cardinal to improving debt dynamics and related economic fundamentals to support these reforms. Government is also working on improvement of Public financial management laws.

In addition Government has developed a Medium Term Debt Strategy while regular debt sustainability analysis will be undertaken.

Regarding the programme with the IMF, the nation may wish to note that we started engaging with the IMF on the basis of the ESGP approved by Cabinet in 2017. The ESGP is being strictly implemented with much of the milestones achieved. We are committed to continue the implementation at all levels of Government. In this regard, we will continue to engage the IMF on a similar basis with respect to debt management.

The government is developing a financing profile that is aimed at addressing our economic development aspirations without compromising debt sustainability, in an effort to bring the debt levels to moderate risk of debt distress over the medium term from high risk of debt distress. Once our new strategy has been completed, I will be engaging the IMF to obtain their concurrence.

I will now clarify the position of Cabinet and the Ministry on the restructuring of debt. This issue is unfortunately being misinterpreted that Government is anticipating challenges in servicing its debt. As announced in the 2018 budget address, the Government has commenced preparations to address the repayment of its Eurobonds through the operationalization of a sinking fund. Part of the process involves addressing liquidity risks at the time of paying/refinancing of the Eurobonds. As part of prudent risk management, the Government decided to reposition some flows falling due during the period of the Eurobonds, by engaging some creditors that may be open to pushing some flows this period forward. We are not contemplating any stock re-profiling but just the flows that fall due in the period of the repayments. China being a natural first creditor and accounting for 28% of our debt was a natural creditor to have a discussion with.

May I emphasize that Zambia does not intend to and will not default on its obligations. Only creditors that will be amenable to the proposal will be engaged and this will be on the basis of willingness. As part of the broader strategy, the Government has since put in place a team of officers from the Bank of Zambia, Ministry of Finance and Ministry of Justice to undertake work that will determine exactly what form of strategy will be adopted for the repayment/redemption of Eurobonds. The work will be completed by the end of the 1st quarter 2018.

Other major policy reforms that must continue are in agriculture and energy. In the agriculture sector Government is committed to resolving the teething challenges of the implementation of the e-voucher. Further, the e-voucher has given us an opportunity that will allow us to have a benchmark for graduating of farmers in future. In the energy sector, reforms in the both fuel and electricity sub-sectors, will continue in 2018 and beyond. These include full migration to cost reflective prices and sustenance thereafter, Government disengagement from importation of finished petroleum and comingled products. These will help anchor the fiscal and ensure efficiency in service delivery thereby enhancing economic performance.

STRUCTURAL REFORMS

The implementation of measures to strengthen tax revenue will commence in earnest in 2018. The Treasury has developed a monitoring framework to ensure early finalization and implementation of the National land titling programme, installation of fiscal registers and monitoring system for excise duties in telecommunications.

Other structural reforms include improving business environment and ensuring an affordable and more sustainable pension system. Government will accelerate the development and implementation of legal and institutional framework that will give business greater chance of survival. This will be done through limiting regulatory and administrative burden for MSMEs as contained under the ESGP. In the pension area, a review of national pension and broader social security protection reforms will be carried out.

In order to reposition the State Owned Enterprises, Government through IDC will continue work on ascertain long term sustainability of these assets. This is with the view to improve the contribution of state owned enterprises to the Treasury as well as country’s development.

The Government will strengthen the PPP function and law as a key measure to augment resource mobilization going forward through private sector engagement.

LEGAL REFORMS

Legal reforms form a cornerstone of effective service delivery for any country. In this regard reforms, such as those in the Public Financial Management will continue. These include the Zambia Public Procurement Act (ZPPA), Insurance Bill, Bank of Zambia Bill, Deposit Protection and Pensions and Social Security bill, planning and budgeting, loans and Guarantee (Authorization) Act.

Government will ensure the enactment of the new Public Financial Management Act during the current sitting of Parliament in 2018.

Procurement reforms will continue to control wastage and overpricing. The amendment of the law will be undertaken to introduce reference pricing, expert estimates for works and services and enhance preferential contracting for locals.

INFORMATION PROVISION TO THE PUBLIC

In order to improve information flows, the Ministry of Finance will be working out measures to periodically disseminate information on economic performance on a predictable basis and undertake appropriate stakeholder engagements.

CONCLUSION

As a democratically elected Government, we owe it first to the Zambian people to tell them the truth not just about the debt government contracts on their behalf, but also about the state of the economy in general. Transparency in the management of public finances will therefore be key for us to win both the public trust, confidence of international financiers trading in government instruments and investors.

May I take this opportunity to thank His Excellency the President of the Republic of Zambia, Mr. Edgar Chagwa Lungu for his trust through the mandate given to me to steer the Ministry of Finance’s work in delivering service to the people of Zambia and to build on the successes of my predecessor Honourable Felix Mutati, MP. I wish to commit myself to His Excellency’s call for me to deliver the mandate without letting down the people of Zambia. Fiscal sustainability for a prosperous Zambia will be my guiding principle as I take up this work. Together, we will succeed.

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49 COMMENTS

  1. Also pay the debt you owe CEEC just to clear your name ( be it for your husband) with CRB. Its imoral to have a minister of finance who is in debt which he/she aint servicing.

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    • How many years now of PF in power, 7 or 8 and the country and its people are still waiting for the 90 days promises, More money in your pockets, more jobs, better schools and hospitals etc but alas non of these promises has come true, I feel sorry for my country, To have leaders like EL, its like the blind leading the blind.

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    • Why these people are in my face all the time, I don’t know. It’s either Lungu, Margaret, Dora, the so called Professor, Lusambo, sometimes Bana Daliso and from time to time another random character just comes up making outrageous and incoherent statements .If these people think I am enjoying any of this. To be honest I am not! Go Away all of you!

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    • One part I don’t understand is uncertain weather will impact electricity generation. Yes too much rain fall will affect crop but should fill up the low dams as the excuse has always been.

      What going on Margaret. Hope you took no shot tequila mid writing. lol

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    • Madam Mwanakatwe, borrowing from CHINA to pay EURObond is very wrong.

      This whole statement is HOLLOW & thin with real solutions to tackle the deep shi.t PF govt has put us in. This woman is incompetent. It’s a hopeless situation guys.

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    • Where is the projection on the cost of living for the Zambians? A fake positive conclusion. I concur with @kumwenu: How do we have a minister of finance who cannot even manage her own Family financials?? On ethical grounds, she does not qualify for this post.

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    • After re-examining the photo above I feel very angry about this woman. She has come into this delicate office (in the first place where she does not even deserve to be because the courts said so) with nothing on the table, nothing written on paper (my forensic team have looked closely on the paper and there is nothing on it), clearly nothing in terms of activity in the office and probably nothing in her brains and she is sitting there masquerading as a Minister of a country drawing huge salaries from the tax payer’s purse. I don’t think that this is right. This woman should at least sweeping in a bank somewhere in Cairo road. Fokofu! This dununa and uubomba mwibala culture is going too far!

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    • The performance in her office is 0 % at the moment. Go away, you should no even be a minister. Charlotte should be. I am so angry about this.

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    • @analyser
      take a day off and don’t read any of this garbage, your health is prime. Don`t let this s.h.it drive you crazy, enjoy life.

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    • @Analyzer: That’s the most boneheaded statement I have heard this year. To even compare the wife of that muzungu wopusa to a daughter of the soil who was CEO of a multinational bank is an abomination. Please!!!

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    • @General Kanene I’ll not rest until the Zambians get the government they voted for and not have these cheap and small-time crooks manipulate the show, like Lungu himself says it’s not fair.
      @Zambian citizen I’ll not be responding to a racist to add credence to their trash.

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    • Loool! This BR Mumba man amuses me. Ati ‘Let’s roll’ as if anything different will happen. smh.

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    • @Analyzer: Spare us the antics!! Zambians got the government they voted for and always have. They have rejected hh five times while doing that since 2006. Remember, it was ZAMBIANS who voted for Mwanawasa in 2001 and 2006, it is them who voted out MMD in 2011 and chose PF. So your futile attempt to shove a 5 time reject down Zambian’s throat will always fail. Sadly you will die bitter and miserable….

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  2. there seems to be a belief that the economic indicators are currently positive, I wonder why we cant feel it as citizens. whats odd is that we have powerful technocrats in Ministry of Finance but the outcome does not show it. anyway I have taken note

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    • Technocrats who just there to drink talk. Boring life.
      I prefer my adventurous life. This summer I am going to Alaska for a week, to help catch pregnant salmon fish in streams.
      Last year I was bowl hunting again, shoot nothing.

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    • @Nostradamus that’s the way to go. I’ll also be be in Europe driving around, kufilekafye. But I’ll steal be fighting in the peripheral. Zambia is my country not Lungu’s, certainly not Dora’s or any of these hijackers. Uno!

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  3. Your appetite for Treasury Bills mops up funds that local businesses need, as such it becomes increasingly difficult for SMEs to access funds at reasonable terms. If you really want to see SMEs thrive avoid Treasury Bills, that will force banks to avail funds at reasonable rates

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  4. It is wonderful that the economy has grown. However, the people’s incomes must grow with it. That economic growth is undermined by inflation.

    A slight reduction in lending rates was recorded at 24.6% as at end 2017 from 29.49 0% in 2016. Lending rates are still prohibitively high and posing challenges for enhanced business activities.

    In other words, at the consumer/small business level, the Zambian economy is being starved of cash. If the minister wants economic growth, that’s where you start. Not attracting more foreign corporations on worse and worse terms.

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  5. Its all very well to paint a rosy picture of the state of the economy, but all efforts is wasted if the government continues to borrow recklessly and abates corruption by leaving ministers alleged to be involved in corrupt activities. No amount of window dressing will absolve the government of stealing when they can approval purchase of wheelbarrow fire tenders for US$42 million, road contracts cost are inflated, etc, etc, etc. Please keep your boss away from the national purse like Mutati did, otherwise all you say is cheap talk glossing over the elephant in the room.

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    • I read your postings on a daily basis because I find them to make a of of sense. However, you said Mutati managed to keep his boss away from the national purse. Lungu took office on 25th January 2015 (15th September 2016 for Mutati) and at the time he was worth K2 million and after one year in office he declared K23 million. If Forbes reports are to be believe, he is the second richest person in Zambia with a net worth of around 400 million dollars (as of December 2017) only behind HH. In a matter of months, he will be the richest in Zambia. He is way ahead of GBM and Findlay in terms of riches.

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  6. ” Banking sector conditions continued to be sound and satisfactory. ”

    And yet, at 24.6%…

    ” Lending rates are still prohibitively high ”

    So is this the goal? How can 24.6% lending rates be satisfactory?

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  7. Jealous pipo will continue announcing their evil, but goodness shall follow you, madam mwanakatwe continue with your hard working. all the blessings.

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    • That’s the problem!
      It’s not about her but the masses of our people. We ask: Are her policy pronouncements sound?

      Goodness will indeed follow her but at what cost to our people?

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  8. I have not heard about the amount of debt Mwanakatwe, that is our main interest how much is it? 20billion USD?

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  9. Talking about frameworks and initiatives is easy. Numbers are more difficult. Time will tell if we will be drinking Tarino and hiding USD under the mattress…

    What of the effect on investment of government just ignoring or avoiding the rule of law as you have done over the Lusaka Central seat? Or Kapata saying government can just allocate money anyhow without following legal process ati “because it’s a policy”?

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  10. What is the total debt we are owing to the international community and locally?
    One of the reasons why lending may be prohibitively high could be when Government borrows a lot especially from banks, crowding out occurs (individuals and SMEs are squeezed) and hence the higher lending by banks to the public. In short, Its always lucrative to lend to the Government than to individuals because of the low risk. That has to be addressed as well Madam Minister.

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  11. Well it’s just english on paper, what’s on the ground is what really matters.
    What’s the economical impact on the ordinary citizen now?

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  12. Again on the *GDP Growth:* are we manufacturing anything to contribute to it, I think I with hold my prayers for her??????

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  13. They speak in tongues …..tell us how the reserves have fallen from $3billion last year to $2.1 billion today……give us the employment figures……give us the volume and type of finished products exported

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  14. Mwanakatwe’s pronouncements are NOT compatible with ECL’s policy.

    Mwanakatwe is saying:- “Key to expenditure restraint is to concentrate on completing ongoing projects as outlined in the ESGP and emphasized by His Excellency the President of the Republic of Zambia Mr. EDGAR CHAGWA LUNGU.”

    ECL is on video clip record and has emphasized over and over about his policy i.e. “Ubomba mwibala alya mwibala, lelo tabatila kulyanembuto iyo”. In other words, ECL’s policy and message to workers in companies / organisations is:- Pilfer, but leave enough behind once you are done, so that your companies / organisations can survive. And to prove that he means what he is saying, ECL has dubiously acquired much more money in during his Presidency (Tax free) than his salary can account for…

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  15. Finally a Minister that is actually talking about the economy. Mutati was all about ideas, had he been a little more robust and direct towards economic growth, Zambia would be growing faster.

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  16. This is an economic statement in abstract. It does not relate to the realty on the ground or if it does ,comes close just a bit.

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  17. Oh my God! I never realised that Zambian men are so paranoid about women. All you dudes can do is whine, whine whine because these highly educated, eloquent women are busy tring to make a difference running the country efficiently. Why can you not try to be positive or at worst shut up? This is the 21st cent and womenfolk are passing you by if you blinked. Give credit where it is due.These women are duly qualified and highly competent. Fumbi Kobo! you are ithe rearview mirror in the dust male chauvanists!

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  18. This quote is from Analyzer “@Nostradamus that’s the way to go. I’ll also be in Europe driving around, kufilekafye. But I’ll steal be fighting in the peripheral. Zambia is my country not Lungu’s, certainly not Dora’s or any of these hijackers. Uno!
    Very interesting ” But I’ll steal be fighting in the peripheral”
    Ba Analyzer whatever you call yourself, please write in vernacular (Tonga or Lozi). Do not embarrass yourself. I believe you meant STILL and not steal.

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  19. no one in Zambia knows what to do about the economy.
    lets all enjoy and keep squandering from wherever we can.
    we will then develop as a nation!
    kikikiki

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  20. Sounds positive.As for those waiting for more money in their pockets ,let them work hard.There is a lot of money around but when you are lazy man or woman then your pockets have holes in them and it will be empty till death.. why do you think Isralis ,Chinese, Americans are always commibg to Zambia? They don’t come to play and pray but to get the money which u.i can’t see cz laziness has blinded you.

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