The 2021 Zambia National budget was presented on the 25th of September, 2020 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
- Corona Virus 19 (“COVID 19) has stressed health systems in most countries across the world, resulting in an unplanned and an escalation in health related expenditure.
- The global economy is projected to contract by 4.9% due to the adverse effects of the COVID-19 pandemic.
- Advanced economies are expected to contract the most by 8.0% this year compared to the growth of 1.4% in 2019.
- Emerging markets and developing economies are forecast to decline by 3.0% after growing by 3.7% in 2019. China is the only economy expected to register a positive growth of 1.0% in 2020 compared to 6.1% in 2019.
- Sub-Saharan Africa, economic activity is projected to contract by 3.2% from a positive outturn of 3.1% in 2019. The larger economies of Nigeria and South Africa are projected to contract by 5.4% and 8.0%, respectively.
- Copper prices are projected at US$5,500/tonne in 2020 compared to US$6,200/tonne in 2019. Copper prices have since risen, peaking at US$6,840/metric tonne in September 2020.
- Crude oil prices average US$41/barrel in 2020, compared to US$66/barrel in 2019. Crude oil prices have also started rising, reaching US$46/barrel.
Growth and Inflation
- 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.
- 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.
- 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.
- Real GDP growth is projected at negative 4.2% in 2020, the first recession since 1998.
- Over the first 8 months of 2020, inflation exceeded the medium-term target range of 6-8%, averaging 15.0%. Inflation rose to 15.5% in August from 11.7% in December 2019. This was mainly driven by the upward adjustment in energy prices, higher food prices and the pass through from the depreciation of the Kwacha.
- The Kwacha depreciated to K19.95 against the US dollar as at 22nd September, 2020 from K14.05 at end-December 2019. This represents a depreciation of 41.9%. The depreciation largely reflects supply constraints and increased demand for foreign exchange, particularly the importation of agricultural inputs, health related supplies and procurement of petroleum products.
Download the full Budget Highlights here.