REDUCED copper prices have forced the downward revision of the projected seven percent growth of the Gross Domestic Product (GDP) for 2015 to 5.8 percent, Finance Minister Alexander Chikwanda has said.
Mr Chikwanda said this when he presented a mid-year budget review statement in Parliament yesterday.
He said the weak copper prices had adversely affected foreign exchange earnings and supply on the domestic market.
The minister said coupled with the strengthening of the United States dollar as well as a slowdown in economic activity in Europe and other emerging market economies, the projected percentage growth could not be realistic.
“We expected the economy to grow by at least seven percent. This growth premised on healthier recovery in the global economy as well as continued favourable performance in the country’s growth sectors. However, the global economic environment has been much weaker characterized by a slowdown in economic activity in Europe and other emerging market economies. The slowdown coupled with the strengthening of the US dollar has triggered a decline in prices of most traded commodities including copper our main export,” he said.
Mr Chikwanda said the drop in copper production was as a result of the persistent fall in the price of the commodity which in turn led to the weak global demand for the metal.
He said the mining sector had projected to grow by over 12 percent but that the fall in copper output during the quarter was likely to result in lower than projected total copper output in 2015.
“We had projected that the sector would grow by above 12% mainly based on copper production exceeding 800,000 metric tonnes in 2015 from 708, 265 metric tonnes in 2014. But data for the first quarter shows that copper output at 164,386 metric tonnes was 8.5% percent lower than the 179,584 metric tonnes produced in the corresponding quarter of 2014,” Mr Chikwanda said.
He bemoaned the inhibitive cost of borrowing by commercial banks despite the stability in the lending rates. Mr Chikwanda assured Government’s commitment to closely collaborate with the central bank and other relevant financial institutions to ensure that the cost of borrowing remained affordable.
Meanwhile, Mr Chikwanda told the House that despite the country’s external debt standing at US$4.8 billion and the domestic debt pegged at US$3.7 billion, Government was not complacent but had undertaken periodic debt sustainability analysis. He said Government had set up a sinking fund for the purpose of repaying Eurobonds amounting to US$750 million and US$1 billion issued on the international market in 2012 and 2014 respectively.
“As a step in ensuring prudent debt management, I have set up a sinking fund for the purpose of repayment of the two 10-year sovereign Eurobonds issued on the international capital market in 2012 and 2014 respectively. I have further set out regulations for the management and operation of the fund to address issues of transparency and accountability to ensure that the resources in the fund are used for the sole purpose of paying back the Eurobonds,” he said.