International Monetary Fund: the worst may be over in ZambiaSeptember 8, 2009 at 4:11 pm | Posted in Africa | Leave a comment
Tags: Africa, global crisis, international monetary fund, zambia
The outlook for the Zambian economy is beginning to improve, and the worst of the global recession appears to be over, according to International Monetary Fund (IMF).
The body has however warned that the pace and extent of the recovery is not yet well established.
“The more-than-doubling of copper prices since the beginning of the year, along with some improvement in other sectors, will underpin somewhat higher GDP growth in 2009 than previously forecast and strengthen the balance of payments. The improved outlook is already being reflected in the appreciation of the Kwacha since May of this year. The recent exchange rate appreciation should, over time, help rein in inflation, as should the expected deceleration in food price increases given the bumper harvest,” the IMF which ended its visit in Lusaka at the weekend said.
The mission also noted that the shortfall in revenue in 2009 has resulted in the government accessing financing from the Bank of Zambia, supported by the increased access to IMF resources, in order to meet its capital spending targets.
The mission which was in the country to review economic developments in 2009 and the government’s plans for the 2010 budget, also noted that depending on revenue performance in the second half of the year, additional recourse to such financing may be necessary to achieve and preserve proper execution of budgeted spending.
“The authorities and the mission agreed on a framework for the 2010 budget which maintains the focus on increased spending on priority capital projects and social sectors, while remaining consistent with macroeconomic stability,” said the mission’s statement.
It further stated that the authorities and the mission had a preliminary discussion on the IMF’s recent allocation to Zambia of Special Drawing Rights (SDR) in an amount equivalent to about US$600 million, which, in the first instance, would expand Zambia’s international reserves and provide a stronger foundation for exchange rate stability going forward.
“The mission will return to Lusaka in mid-October to conduct the discussions for the 2009 Article IV consultation and the third review of the Poverty Reduction and Growth Facility (PRGF) arrangement. This will provide an opportunity to revise, if necessary, the targets of the economic programme for end-2009 and to set targets for 2010. At that time, the mission will re-assess whether Zambia would need further financial assistance from the international community,” concluded the mission statement.
Zambia was categorised as hard hit by the recent global economic crisis, with the collapse in copper prices in the second half of 2008 putting pressure on the mining sector that resulted in significant job losses. Moreover, the reduced inflows of foreign exchange, along with withdrawals by portfolio investors, led to a sharp depreciation of the exchange rate in the first months of 2009. This, in turn, led to a sharp contraction in imports and a shortfall in import-related government revenue relative to budgeted levels, according to the IMF, adding that as some donor support was also delayed, execution of spending proved to be challenging.