By BEN PHIRI-
Zambia’s macro-economic performance over the last decade has not skipped the attention of the International Monetary Fund (IMF) which has rated the country as one of Africa’s fastest growing economies.
The last 10 years has seen the country’s Gross Domestic Product (GDP) growth averaging 6.4 per cent with such broad-based improvements extending beyond the mining sector to agriculture, forestry, fisheries, manufacturing. construction, transport, storage and communication as well as the financial intermediary sectors.
The best time for the Zambian economy was in 2013 when it posted real GDP growth at 7.3 per cent from 6.5 per cent in 2012, which was higher than 4.9 per cent and three per cent for sub-Saharan Africa and the global economy respectively.
In line with the economic expansion in real GDP, per capita GDP also increased from US$332 in 2000, to $1,784 in 2013.
This shows that the Government has been pursuing appropriate macro-economic policies that will see Zambia attain projected growth of not less than seven per cent in 2014.
With securing of the $1billion Euro Bond, there will be massive infrastructure developments in agriculture, manufacturing and mining, all of which are expected to benefit from increased capital imports which should in turn increase capacity utilisation.
Bank of Zambia(BoZ) Governor Michael Gondwe, however said, borrowing was a key factor in facilitating sustainable economic growth as long as the funds are chanelled to capital projects that will have long term positive effect on the country’s economy.
Borrowing which is one of the BoZ objectives to see commercial banks lower their lending rates will also enhance financial inclusion.
BoZ which recently hosted the 15th Media workshop in the resort town of Siavonga is optimistic that once such efforts are enhanced, the Zambian economy would remain bouyant and sustainable for a long time to come.
Dr Gondwe said this will help to mitigate the high poverty levels, strengthen the Kwacha and slow down inflationary pressures.
“We are alive to the fact that more growth is required in order to have a lasting dent on high poverty levels and even more important, there is need to do more to make growth much more inclusive and equitably distributed among Zambian citizens,”Dr Gondwe said.
The Central Bank Governor also mentioned that inflation which was in double digits during the early 2000s, declined sharply to 7.1 per cent in December 2013 from 7.3 the previous year in 2012, although thiis was 1.1 percentage points above the end year target of six per cent.
This outturn reflected higher non-food inflation which was moderated by lower food inflation. Higher food inflation was largely due to higher fuel prices, coupled with pass-through effects of the depreciation of the Kwacha against other international convertible currencies particularly the United States (US) dollar.
During the four months of 2014, inflation rose to 7.8. per cent mainly attributed to seasonal inflationary pressures associated with food prices.
The targeted inflation levels are expected to be at 6.4 per cent by the end of this year.
According to Dr Gondwe, the general decline in the rate of inflation will help to push interest rates down which had by December 2013, been increased by Commercial banks to 16.4 per cent from 16.1 per cent in 2012.
This reflected upward adjustments in the BoZ Policy Rates which was aimed at containing inflationary pressures attributed mainly to the removal of subsidies on fuel and maize.
Average lending rates in 2013 increased to 17 per cent from around 14 per cent in 2012.
On the other hand, Zambia’s external sector has also registered significant improvements over the last 10 years with notable surpluses recorded over the last five years.
This was due to a higher growth in export earnings relative to import bills and has seen non-traditional exports(NTEs) export earnings doubling to US$10.4 billion in 2013 from $4.5 billiion in 2008.
Metal exports accounted for the largest share of 76.1 per cent to $7 billion in 2013 from $4 billion in 2008 with NTEs posting a stronger growth of 283.6 per cent to $3.4 billion from 900 billion over the same period.
Despite imports growing bigger than exports, this was normal for a growing economy like Zambia as these capital imports were expected to enhance high productivity and ultmately increase the production capacity.
On the foreign exchange market, the Kwacha though experienced some fluctuations, has been relatively stable in the last few years.
However, in 2013, the Kwacha characterised by a depreciating trend against most major trade partner currencies except the South African Rand upon which the Kwacha appreciated by 10.7 per cent reflecting a slowdown in mining output following labour unrest in the South African mining sector.
The Kwacha depreciated against the US dollar by 4.9 per cent to an annual average of K5.39 from K5.39 in 2012 while, at the same time depreciated against the British Pound Sterling and Euro by 3.6 per cent and 8.3 per cent respectively.
During the first quarter of 2014, the Kwacha depreciated by 10 per cent and this development was largely attributed to high demand owing to a higher growth in imports relative to exports, negative investor sentiments, as well as falling copper prices on the global market.
But similarly, the weakening of currencies has been observed in emerging African economies such as Ghana, South Africa and Turkey for example.
Participation of the BOZ in the foreign exchange market has been effective and helped to minimse volatility in the exchange rates.
Scaling up of production, especially value addition in the agriculture and gemstones sectors among others, will stimulate growth in NTEs figures which will translate into high productivity, massive job creation and poverty levels visible in most rural parts of the country will be minimised.
This will in turn, have a positive impact on the strength of the Kwacha against other convertible international currencies.