‘Zambia’s economic outlook bright’
Published On May 14, 2014 » 1733 Views» By Administrator Times » Business, Stories
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By JAMES KUNDA –

GLOBAL rating agency, Moody’s Investors Service has affirmed a B+ and stable economic outlook for Zambia buoyed by Foreign Direct Investments (FDIs) in mining and strong performance in services, manufacturing and construction.
Moody’s Investors Service vice president-analyst, Alexandra Mousavizadeh said strong growth averaging 6.5 per cent of Gross Domestic Product (GDP) over the past five years and low GDP per capita of US$1,683 in 2012, have fortified Zambia’s economic performance.
“Solid and sustained economic growth has also been driven by public investment and a relatively strong macroeconomic policy framework sustained by a legacy of political stability,” Ms Mousavizadeh said.
She said in a statement yesterday that Zambia’s monetary policy framework has been significantly strengthened by the Central Bank policy rate since 2012, in conjunction with an existing target framework to stabilise inflation.
Ms Mousavizadeh, however, identified rising fiscal deficits driven by growing current spending on wage increases and infrastructure expenditure on roads as deterrents to economic stability.
She anticipated that these deficits are likely to remain high in 2014, in spite of plans to increase non-tax revenues and efforts to control the wage bill.
“Current account balance deterioration is also expected to continue, driven by capital imports and softer copper prices, leading to currency depreciation and reserves losses since capital account inflows will not likely be sufficient to finance this deficit,” she said.
Ms Mousavizadeh said moderate government liquidity risk will result in access to various sources of financing such as concessional multilateral and bilateral financing as well as international capital markets such as those bonds issued in 2012 and 2014.
The current account balance deterioration is expected to continue,
driven by capital imports and softer copper prices, leading to currency depreciation and reserves losses since capital account inflows will not likely be sufficient to finance this deficit.
Zambia is experiencing a vulnerability to shocks in copper prices due to the reliance on copper exports for a substantial portion of revenue and foreign exchange.

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