GOVERNMENT is working at consolidating its fiscal position with the aim of avoiding fiscal slippages that have had an adverse impact on the country’s monetary policy and stability of the exchange rate, Finance Minister Alexander Chikwanda has announced.
Mr Chikwanda said in the short term, to forestall injurious distortions in the economy, Government would undertake stability steps through the use of appropriate policy instruments that would not lead to the depletion of the country’s foreign reserves.
In a ministerial statement to Parliament yesterday, Mr Chikwanda said Government was taking steps to diversify the economy through the agriculture and energy sectors as a long-term measure.
Mr Chikwanda said Government was committed to maintaining a free-floating exchange rate but called on the players in the economy including private individuals, banks and the business community to ensure that their actions were supportive of the efforts to stabilize the Kwacha.
He warned that should there be recklessness and irresponsibility on the part of economic players, the consequences were that all Zambians would be affected.
“Government will ensure that it consolidates its fiscal position to avoid fiscal slippages that have an adverse impact on the monetary side and stability of the exchange rate.
To this effect, Government will ensure prudent levels on fiscal deficits. Government is taking is taking steps to diversify the economy through the agriculture and energy sectors as a long term measure,” Mr Chikwanda said.
He explained that the Zambian economy had been a subject of commentary from some sections of society particularly in respect to the exchange rate developments.
Mr Chikwanda said Government was aware of the difficulties that the volatility of the exchange rate had on the business community and the general public and that Government was sharing the economic disruptions the business community had suffered from.
He said the depreciation of the exchange rate meant that the treasury was required to provide for more Kwacha to service its foreign obligations and that resources had to be reallocated in the budget which had affected the provision of quality services in other areas.
“The volatility of the exchange rate during the last nine months, increasing rapidly in September, is as a result of the developments in the domestic economy as well as the global economy. On the domestic front, the deceleration in the mining sector due to falling and reduced production has had a negative impact on the exchange rate as the sector accounts for around 70 percent of our foreign exchange earnings,” Mr Chikwanda said.