ADDING IT ALL UP
On October 20, 2016, at the 2017 Budget Address, Finance Minister Felix Mutati launched the government's economic recovery program, christened "Zambia Plus." The program is designed to spur domestic productivity, through strengthening ties and collaborating with external donors and developers.
There are five main pillars to the program. The first targets fiscal policy, aiming to better administrate the collection of taxes to improve revenue inflows. The second seeks to channel more public money into social protection, in particular pension schemes, so as to dampen the effects of austerity for the most financially challenged. The third aims to reduce inefficient public spending, with stricter regulations and more transparency in budgetary decisions, as well as harsher penalties for those caught abusing the system. The fourth focuses on improving budget planning to bolster government creditability. The fifth and final concerns monetary policy: easing access to credit, lowering lending rates, and reducing inflation.
This proposed economic boot camp could not be more timely. At the end of 2016, Zambia's economy was reporting growth of just 3%, considerably down on the rate of 7% ostensibly required to overcome nationwide inequalities and eliminate poverty. Furthermore, Zambia has suffered from a fiscal deficit for the last 10 years, a deficit that has grown from 1.6% of GDP in 2011 to 10% at the end of 2016. It is commonly held that considerable fuel and electricity subsidies were paramount in creating such a shortfall, and in early October 2016 the government made the bold move of discontinuing fuel subventions, increasing pump prices on diesel, petrol and kerosene for the first time since mid-2015.
However, since then, audit reports have revealed that unplanned, unauthorized spending on the part of ministries, provinces, and other governmental bodies accounted for a far larger percent of the deficit than any subsidy. Untouched expenditures, irregular payments, and undelivered materials amounted to USD72 million. These values represented 3.3% and 4% of the overall deficit, while electricity subsidies accounted for just 2.1%.
In light of this, Zambia Plus's third pillar seems all the more significant. As the National Secretary of the Economics Association of Zambia Herryman Moono told TBY, “One of the key elements of the economic recovery program is budget credibility. For the past five years, this has come under question, and our current deficit is the result of a lack of credible budget.” According to Mutati's statements at the Budget Address, Zambia Plus will see the full implementation of the Integrated Financial Management Information System (IFMIS) by the end of 2017. In theory, the obligatory use of the online data entry system for all government budgetary activities will put a stop to financial mismanagement and internal corruption.
The fifth pillar has also sparked some enthusiasm from Zambian businesses. When he introduced Zambia Plus, Mutati stated that “In 2017, monetary policy will remain focused on maintenance of price and financial system stability in order to support restoration of macroeconomic stability and growth.” It is hoped that a consistent monetary policy, as well one that is aligned with fiscal policy, will help ensure economic stability, as well as raise confidence for sustained private-sector investment.
An IMF mission came to Zambia in late 2016, and concluded that there would be no bail-out until certain conditions were met, including reducing the fiscal deficit and limiting the accruing of public debt. The measures implemented prior to and as a result of Zambia Plus will go some way to contributing to these provisos. Elsewhere, the international community has applauded the program, with several EU member states and the UK issuing statements in support of the plans. However, in its eight Zambia Economic Brief, published in 2016, the World Bank expressed concerns regarding the government's commitment to austerity, underscoring the fact that as per the reform public expenditure is due to increase to ZMK61.4 billion from ZMK50.4 billion in 2016.
These views serve as a reminder that there is always a risk of discrepancy between what is put down on paper, and what is carried out in practice. Whether or not this increased governmental spending is an investment that will pay off and whether or not the recovery program will bring a much desired plus to the Zambian economy remains to be seen.
ADDING IT ALL UP
TABLE OF CONTENTS
Year In Review
What A Year
Zambia has long been a bastion of stability in Southern Africa, and while its economy has been rocked in recent years by the falling value of copper prices, a devaluating kwacha, and high inflation, through the Economic Recovery Program the government has bold ambitions to right the ship.
read articleReview
Convoke, Confound & Collect
Squeezed between a rock and a rather hard place by the slowdown in Chinese demand for copper, by far Zambia's biggest export and government-revenue generator, President Lungu has been forced to get creative in his country's alliances to broaden revenue streams and lessen its dependence on the vagaries of one foreign market.
read articleGuest Speaker
Dr. Stergomena L. Tax, Executive Secretary, Southern African Development Community (SADC)
TBY talks to Dr. Stergomena L. Tax, Executive Secretary of the Southern African Development Community (SADC), on regional economic development, boosting pan-continental free trade agreements, and improving security through mutual development.
read articleInterview
Susan Sikaneta, Ambassador, Zambia to Ethiopia & Permanent Representative to the African Union and Economic Commission for Africa
TBY talks to Susan Sikaneta, Ambassador of Zambia to Ethiopia & Permanent Representative to the African Union and Economic Commission for Africa, on championing peace across the continent, advancing women's rights, and promoting Pan-Africanism.
read articleInterview
Sebastian C. Kopulande, CEO, Zambian International Trade & Investment Centre (ZITIC)
TBY talks to Sebastian C. Kopulande, CEO of Zambian International Trade & Investment Centre (ZITIC), on taming austerity, stimulating sustainable growth, and creating the framework to support entrepreneurship
read articleFocus: Zambia Plus
Adding it All Up
On October 20, 2016, at the 2017 Budget Address, Finance Minister Felix Mutati launched the government's economic recovery program, christened "Zambia Plus." The program is designed to spur domestic productivity, through strengthening ties and collaborating with external donors and developers.
read articleReview: Banking
Macroeconomics Rule the Roost
In its ongoing efforts to diversify away from one principal commodity, copper, the government fosters the development, standardization, and efficacy of the private sector. In doing so the systematic support of the financial universe, especially banks, is vital, as is the goal of financial inclusion.
read articleFocus: SME Growth
IMF support program
An IMF support program stands to provide Zambia with some much-needed discipline on its expenditure and operational efficiencies; however, many caution the need for Zambia to determine what it wants to achieve and how the program will benefit the country.
read articleInterview
Christabel M. Banda, Executive Director, Insurers Association of Zambia (IAZ)
TBY talks to Christabel M. Banda, Executive Director of Insurers Association of Zambia (IAZ), on the evolution of the local insurance landscape, raising awareness, and tackling challenges in the sector.
read articleFocus: Solar
Sunny Side Up
As power demand continues to rise and power production continues to fall behind, it's the same old story for Zambia, still wrestling with an ongoing energy crisis. Public- and private-sector drives are seeking to mitigate this deficit by activating the country's solar industry.
read articleInterview
Margaret K. Chalwe-Mudenda, Director General, Zambia Information and Communications Technology Authority (ZICTA)
TBY talks to Margaret K. Chalwe-Mudenda, Director General of Zambia Information and Communications Technology Authority (ZICTA), on new projects, the ZNDC, and expectations for the year ahead.
read articleInterview
Hon. Dora Siliya, Minister, Agriculture
TBY talks to Hon. Dora Siliya, Minister of Agriculture, on the investments being made in agriculture to enable agricultural households, diversifying Zambia's basket of produce, and making international markets more accessible for local producers.
read articleInterview
Hon. Charles R. Banda, Minister, Tourism and Arts
TBY talks to Hon. Charles R. Banda, Minister of Tourism and Arts, on the wealth of tourism destinations within Zambia, efforts to bring more visitors to the country, and what the Tourism Development Fund will contribute to developments.
read article