Government is committed and will ensure that the programmes and activities approved by Parliament in the 2015 Budget are effectively and efficiently implemented, Finance Minister Alexander Chikwanda has said.
Mr Chikwanda said inclusive growth and job creating strategies through ensuring macroeconomic stability to support both local and foreign direct investment would continue and that Government would also continue to pay particular attention to diversification of the economy and to support for Small and Medium Enterprises (SMEs).
In a state of the economy speech, he said his ministry would ensure that mutually beneficial and regular engagements with investors and the private sector with the underlying objective of accelerating growth, employment creation and poverty reduction would continue.
In order to enhance transparency of the budget and increase oversight by institutions such as Parliament, the Government had made progress in drafting of the Planning and Budgeting Bill that would be presented to Parliament in the course of 2015.
Mr Chikwanda said Government continued to enjoy good relations with the International Monetary Fund (IMF) and other cooperating partners and that following the expiry of the last programme in June 2011, the Government had been interacting with the fund through standard surveillance under the provisions of Article 8 of the fund’s governing laws.
He said the last review the ministry had with the fund was in the first half of December 2014.
And commenting on monetary and external sector developments the minister said as Government they had set an inflation target of 6.5 percent for 2014.
“The outturn for annual inflation in 2014 has been recorded at 7.9 percent. Part of the pressure on the general level of prices emanated from the depreciation of the Kwacha, especially during the first half of the year. Going forward, the Government will endeavour to contain inflation within the low and single-digit range to ensure that business planning and forecasting is not only credible but also resilient,” he said.
He said the exchange rate this year had been towards depreciation, especially during the first half of the year but some measures undertaken by the Bank of Zambia led to relative stability of the currency.
Mr Chikwanda said the Treasury that had been monitoring the level of balances in the banking system and Government will continue to monitor exchange rate developments to ensure stability as continued tight liquidity conditions may over time harm the economy.
He said Government, however, remained committed to ease liquidity conditions in the financial sector once relative stability in the exchange rate has been attained.
He said they had since noted that credit conditions had generally remained supportive of the economic growth though domestic credit had increased by 14.8 per cent.
“As for trade and current account balance, preliminary data indicates that by the end of 2014, the country will have recorded a surplus of over US $1,459.9 million on its merchandise trade. While a current account deficit is projected for 2014, we are, however, confident of a significant improvement in the external sector. The projected deficit is largely on account of lower copper prices coupled with reduced non-traditional exports (NTEs). Subdued global demand for copper on account of lower global economic prospects explains the low copper prices and subsequently, the weaker export earnings,” he noted.
He said the lower NTE’s had been largely on account of stronger domestic demand for some key export goods such as cement and fabricated metal products and that the increase in domestic demand was a testimony of the growing domestic economic activities in areas such as construction and energy, which as a result, had facilitated creation of the largest number of new jobs for Zambians.
Mr Chikwanda said his ministry expected NTEs to rebound and continue to significantly contribute a larger proportion to export earnings.
Meanwhile, the minister said investor confidence continued to be strong in 2014 and that this could be evidenced by the re-affirmation of the country’s sovereign credit ratings at a ceiling of B+ coupled with the continued rise in Foreign Direct Investment (FDI) inflows.
He said FDI inflows were US$ 2,231.5 million, 6.3 percent higher than for the whole of 2013 as at September 2014 and that the investments were broad-based covering Government’s priority and growth sectors such as agriculture, construction, manufacturing and mining.
Mr Chikwanda said foreign reserves currently stood at approximately US$ 3.04 billion from US$ 2.7 billion at the end of 2013 and that this translated to around 3.4 months of import cover.
He said the goal was to attain four months of import cover in the medium-term and six months thereafter.