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Budget Highlights 2020

Budget Highlights 2020

The 2020 National budget was presented on the 27th of September, 2019 by Honorable Minister of Finance, Bwalya Ng’andu. The following are the highlights from the budget presented in Parliament:

Part I: Global and Domestic Economic review

Global Economy

      1. Global economic growth in 2019 is projected at 3.2%, compared to 3.6% recorded in 2018. This is mainly on account of the trade war between the United States of America and China, prolonged uncertainty on Brexit and geo-political tensions.
      2. Growth in advanced economized, led by the USA, projected to fall to 1.9% from 2.2 in 2018 and growth in the emerging economies, estimated at 4.91%, compared to 4.5% in 2018. However, in Sub-Saharan Africa, growth is expected to improve from 3.1% in 2018 to 3.4% in 2019. This is mainly due to growth in non-resource intensive countries.
      3. Copper prices are projected at US$6,091/tonne in 2019 compared to US$6,723/tonne in 2018.
      4. Crude oil prices average US$71 per barrel in 2019, compared to US$49 per barrel in 2018.

      Domestic Economy

      Growth and Inflation

      1. Initially projected at 4%, will slow-down to 2% compared to 3.7% in 2018. This is mainly on
        account of adverse climatic conditions, particularly poor rainfall in the 2018/2019 rainy season, which negatively affected agricultural production and electricity generation. The lower electricity generation has had negative spill-over effects on other sectors. The budget deficit is estimated to close in line with the target of 6.5% of GDP on a cash basis.
      2. The Kwacha depreciated by 9.4% to an average of K13.03 per United States dollar in August 2019 from K11.91 per United States dollar in December 2018.
      3. Inflation was 7.9% in September 2019 from 6.1% in December 2018. Food inflation was the key driver, recorded at 8.6% in September 2019 compared to 4.8% in December 2018. Non-food inflation reduced from 7.5% to 7.3% over the same period.

      Monetary Performance

      1. The average inflation remained broadly in line with the 6 to 8% target range in the earlier part of 2019. In the second quarter, inflationary pressures built up, resulting in inflation breaching the upper bound of the target range in May, 2019 at 8.1%. As at end-August 2019, inflation rose further to 9.3%. This was largely on account of higher food prices and the pass-through effects from the depreciation of the Kwacha against the United States dollar.
      2. To counter inflationary pressures, the Policy Rate was adjusted upwards to 10.25% in May 2019 from 9.75% in December 2018.
      3. Banks’ average lending rate rose to 26.0% in August 2019 from 23.6% in December 2018
      4. The ratio of non-performing loans to total loans dropped to 9.4% at end-August 2019 from 11.0% at end-December 2018

      Download the full Budget Highlights here.

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