Finance Minister Bwalya Ng’andu has announced an increase in Zambia’s external debt from $10.18 billion to $10.23 billion while dDomestic debt has also jumped by K2 billion, from K58.3 billion to K60.3 billion.
Speaking at the second quarter briefing on the performance of the economy today, Dr. Ng’andu who was appointed by President Edgar Lungu on Sunday to replace Margaret Mwanakatwe, said the increase emanated from increased disbursements to infrastructure projects.
He has further pledged to enhance implementation to austerity measures announced by the government a couple of months ago, which included cancellation of some projects and reduced borrowing from external sources.
“The external debt stock as at end June 2019 was US $10.23 billion compared to US $10.18 billion at end March 2019.The stock of guarantees is currently US $1.3 billion, unchanged from the end March 2019, and end-December 2018 position. Domestic debt in terms of securities and bonds as at end June 2019 was K60.3 billion showing an increase from the end-March position of K58.3 billion. During the quarter, subscription rates for government securities declined relative to the first quarter of 2019, due to liquidity challenges, perception and exit of foreign participates in the market,” Dr Ng’andu said. “Arrears stood at K16.7 billion at as end March 2019, up from K15.6 billion as at December 2018. The increase in arrears is due to increased disbursements on infrastructure development. The first task is to achieve fiscal sustainability by reducing the deficit over the medium term to sustainable levels of 3 to 4 percent of GDP. In this regard, I will ensure that we enhance measures to achieve fiscal restraint or consolidation, by implementing well targeted expenditure measures. The second, and related task, is to increase our capacity to mobilize resources.”
He said this entailed increasing efficiency in collection of tax revenue and fixing leakages in Non-Tax revenue collections through increased use of IT solutions.
“Another priority will be ensuring debt sustainability, which is cardinal in reducing fiscal risks and vulnerabilities. Our main focus will be to enhance the pace at which we will be implementing the austerity measures that were pronounced by Cabinet; Dismantling of arrears owed to suppliers and contractors will be another important task. We need to commence implementing a calculated strategy towards dismantling of arrears to ease liquidity in the market, improve financial sector performance, get businesses to operate smoothly and reduce lending rates to get the economy back on a higher growth path,” Dr Ng’andu said, who added that he would like to see an economy where all citizens meaningfully participate in economic activities and meet obligations.
And on Zesco’s load shedding, Dr Ng’andu said the load management being implemented by the power utility will affect most sectors of the country’s economy.
“Further, the continued lower investment and subdued commodity prices may affect copper production. Climate change challenges continue to weigh down agricultural production and electricity generation. On the basis of these risks, we project that growth will be in the 2 to 3 percent range in 2019, and to gradually pick up in 2020 and the medium term. Over the first half of 2019, total revenues and grants amounted to K32.6 billion, 8.31 percent above the projection of K30.1 billion,” Dr Ng’andu said. “Domestic revenues at K32.1 billion were above target by 9 percent. This was mainly driven by higher non-tax revenues collections, mostly from declaration of dividends. On tax revenues, VAT collections were higher than projected by 17 percent, although refunds have increased to an average of K1.4 billion per month from around K800 million in 2018. This has deprived the revenues required for capital and social sector spending.”
He said external gross reserves remained unchanged at US $1.41 billion, which is 1.6 months of import cover.
“The position has been supported by the continued foreign exchange purchases from the market and mineral royalty flows into reserves. The Government will continue with policy measures to support the build-up of reserves, which among others, will include payment of mineral royalty in US dollars and buying of foreign exchange from the market by the Bank of Zambia. Measures on gold purchases will also continue,” said Dr Ng’andu.