On Friday, 29th September, the Zambia 2018 National budget was presented to the National Assembly by Honourable Felix C. Mutati, MP Minister of Finance. The following are the highlights of the Budget:
Part I: Global and Domestic Economic review
- Global economic growth in 2017 is projected at 3.5%, a rate slightly higher than the 3.2% recorded in 2016. This is mainly premised on a projected 4.6% growth in the large emerging and developing economies, driven by the gradual improvement in commodity prices.
- Growth in advanced economies is expected to strengthen to 2.0% in 2017 from 1.7% in 2016. Sub-Saharan African growth is projected to expand to 2.7% in 2017 from 1.3% in 2016, driven by increased agricultural and mining output.
- Global economic activity gains momentum, commodity prices are expected to continue strengthening in 2017. Copper prices are projected to average US$5,827 per tonne in 2017
- On the domestic front, the Zambian economy in 2017 has continued to rebound. Growth is expected to be above 4.0% from 3.8% in 2016. Key drivers will be the mining, agriculture and manufacturing sectors supported by improved electricity generation. The Zambian economy has outpaced the Sub-Sahara African economic growth of 2.7%.
- The exchange rate of the Kwacha against major tradable currencies has been relatively stable appreciating by approximately 4.0% to date.
- Inflation has fallen significantly to 6.6% in September 2017 from 18.9% during the same period in 2016.
- The Bank of Zambia eased monetary policy significantly in 2017. The policy rate was reduced from 15.5% in January to 11% in August 2017. Statutory reserve ratios reduced from 18% to 9.5% over the same period.
- Commercial bank average lending rates only fell marginally to 26.6% in August 2017 from 29.4% in December 2016. Private sector credit remained subdued, contracting by 2.9% as at end August 2017. Asset quality also deteriorated as reflected by increased non-performing loans to 12.2% relative to total loans, compared to 9.7% as at end December 2016. This is above the internationally acceptable threshold of 10%
- Government has successfully restructured the Intermarket Banking Cooperation that closed last year. The shareholder agreement for the new restructured bank has been concluded and the capital requirement has been met. The new bank will operate under the name of Zambia Industrial Commercial Bank and will take over the assets of Intermarket Banking Cooperation.
- Government is now repositioning the National Savings and Credit Bank and Development Bank of Zambia to improve governance structure and their capability in contributing to the development of the banking sector and the economy. The repositioning will include the restructuring of the National Savings and Credit Bank into a full-fledged commercial bank with private equity participation.
Growth and Inflation
Download the full Budget Highlights here.