STATEMENT BY THE SECRETARY TO THE TREASURY, MR. FREDSON K. YAMBA, AT THE END OF AN IMF MISSION TO ZAMBIA, 31ST MARCH, 2015
Ladies and Gentlemen of the Press, good morning and welcome to the Ministry of Finance. As you may be aware, an IMF team has been in the country for consultations with Government and it is customary that after these consultations we issue a joint statement on the progress we have made. Let me extend my gratitude to the Mission Chief to Zambia, Mr. Tsidi Tsikita, and his team for coming to Zambia and for the fruitful discussions that we have held.
We have agreed on a number of issues relating to the economic governance and the prospects of our economy. We are in general agreement that the country is facing challenges in 2015. These challenges are arising from both domestic and external factors. On the external side the falling copper prices and the strengthening of the US Dollar have led to challenges for mining operations and volatility in the exchange rate. On the domestic front, the fall in copper prices has reduced projected revenues for the fiscal and posed challenges in the implementation of the new mining fiscal regime.
However, the Government is committed to resolving these challenges. On the external sector, we have always been convinced that diversification of the economy remains the more sustainable way of insulating the economy against adverse external shocks.
Domestically, as directed by His Excellency the President, we have engaged in dialogue with the affected stakeholders in the mining sector so that we arrive at a resolution that will ensure continued operations. This will facilitate the continued contribution of the sector to the growth of the economy and provision of resources that Government can use to invest in the Zambian people. We are unwavering in our commitment towards this goal as we believe that Zambia offers some of the best opportunities to investors and it should remain so over the long term.
Let me now highlight where we see the economy in 2015 and the medium term. On growth, we remain confident that despite the external and domestic factors that I have alluded to, we see continued positive real GDP growth in the region of 6 percent. Mining will continue to grow despite the current challenges.
Agriculture growth is projected to be less buoyant after the bumper harvest of last year, due in part to the less than normal rainfall received mostly in the southern half of the country. This development emphasizes the importance of diversifying the crops grown in various areas to take advantage of ecological zones and in the process enhance the resilience of the sector and contribute meaningfully to growth, revenue, job creation and foreign exchange earnings.
Other growth sectors in 2015 and the medium term will be manufacturing, construction and transport and communications.
Ladies and Gentlemen, let me also shade some light on the fiscal consolidation measures we are taking in light of the reduced revenue projections. These include:
- Re-alignment of Government expenditure to priority areas and improved implementation of developmental projects;
- Streamlining expenditure items such as the Farmer Input Support Program so as to support diversification in the agriculture sector;
- Limit purchases under the FRA to strategic reserves;
- Enhance revenue collections;
- Improve Government cash management;
- Adherence to cost reflective prices in the energy sector;
- Prioritize capital spending to strategic projects; and
- Limit Government borrowing.
Government will also ensure that fiscal and monetary policy are in tandem so as to enshrine macroeconomic stability. Due to the depreciation of the Kwacha, monetary policy has in the past few months been characterized by tightening. We however, intend to quicken the pace of fiscal consolidation to provide relief on the monetary front to spur growth. It is our belief that fiscal and monetary policy should be facilitative of growth and the policy thrust for the medium term is to ensure that both the fiscus and monetary policy facilitate higher growth and macroeconomic stability. Towards this end, we shall continue to aim for attainment of single digit inflation.