Kwacha volatility, cause identified

And Government has indicated that it intends to minimize on the rate of borrowing both domestic and external in the near future for the betterment of the country’s economy.

Speaking during a joint Zambian Government and International Monetary Fund (IMF) press briefing in Lusaka today, Secretary to the Treasury Fredson Yamba says the Bank of Zambia has taken measures to address these issues by limiting liquidity in the market and encouraging big market players to conduct their business in more responsible manner.

Mr. Yamba says government will continue to encourage diversification of the economy to expand the export base towards manufacturing, tourism, agriculture and value addition particularly in the mining sector and construction.

Mr. Yamba says an IMF team from the United States of America led by Byung Jang has been in the country since May 27th to review economic developments and discuss the macroeconomic framework with the Zambian authorities.

He states that Zambia’s growth prospects remain positive and strong and that government has projected that real domestic product growth in 2014 will be around 6.5 percent driven by positive growth in agriculture in the preceding farming season, pick up in mining activities, manufacturing, construction and energy services.

On the External Sector Development, Mr. Yamba says the challenge in the sector is the volatility of the Kwacha and the fluctuations in the prices of metals on the international market.

Speaking during the same briefing, IMF Representative, Byung Jang, observed that the recent steep depreciation of the Kwacha is raising inflationary pressures and that expansionary fiscal policy has created large budgetary imbalances.

Mr. Jang notes that rebasing of the national accounts has revealed that the economy is 20 to 25 percent larger than the earlier estimated growth which is projected to remain strong at 6.5 percent in 2014 and the medium term outlook is supported by ongoing expansion in copper production.

He states that the Bank of Zambia has already substantially tightened monetary policy in response to exchange rate developments and to address rising inflation, including raising its policy rate and reserve requirements for banks.

He adds that the Zambian government has indicated strong determination to ensure that the fiscal deficit does not go beyond the budgeted 5.2 percent of rebased GDP in 2014 and is reduced to 3 percent of GDP over the medium term.

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