On the 29th of October, 2021, the 2022 Zambia National budget was presented by Honorable Minister of Finance and National Planning, Situmbeko Musokotwane. The following are the highlights from the budget presented in Parliament:
Part I: Global and Domestic Economic review
- Government has inherited an economy suffering from the effects of extreme indebtedness and COVID-19..
- The global economy is expected to rebound this year and grow by 5.9%. Last year, the global economy contracted by 3.1%.
- The recovery in growth this year is attributed to the relaxation of COVID-19 restrictions that allowed for the resumption of economic and other activities.
- Local population growth is currently estimated at 2.8%.
- The average price of copper from January to September 2021 was US$9,194/tonne compared to US$5,834 over the same period in 2020. Currently, copper prices stand at US$9,850/tonne.
- Crude oil prices rose to US$68/barrel from US$43 over the same period. More recently, crude oil prices have shot up to US$84/barrel due to constrained supply.
Growth and Inflation
- Real GDP for the first quarter of 2021 grew by 0.5% and improved to 8.1% in the second quarter. Overall, the economy is projected to grow at 3.3% in 2021 against a contraction of 2.8% in 2020.
- Inflation averaged 22.9% compared to 15.2% over the same period in 2020. This was beyond the target of keeping inflation between 6 and 8%. The rise in inflation is largely due to the sustained increase in food prices as well as the depreciation of the Kwacha.
- The private sector grew by 41.9% in August 2021 against the contraction of 0.9% in August 2020. The increase was partly attributed to disbursements from the Bank of Zambia to support businesses through the Targeted Medium-Term Refinancing Facility.
- Credit to Government to meet domestic financing needs continued to expand, albeit at a slower pace, growing by 29.3%, year-on-year, in August 2021 compared to 61.7% in August 2020
- The Kwacha strongly appreciated between December 2020 and September 2021 mainly on account of improved portfolio investment flows. The Kwacha appreciated by 22.4% to a monthly average of K16.37/US$1 in September 2021 from K21.09 in December 2020.
- Average commercial banks’ lending rates remained high at 25.9% in September 2021. This is compared to 25.1% in December 2020.
- In the banking sector, the ratio of non-performing loans to total loans, at 7.7% at end-August 2021, was below the maximum prudential threashold of 10.0% from 11.6% at end-December 2020.
- The non-bank financial institutions sector continues to face challenges, with the ratio of non-performing loans to total loans rising to 23.1% in August 2021 from 20.4% in December 2020. This was above the prudential maximum benchmark of 10.0%. The unfavourable performance was largely due to poor underwriting procedures and delayed remittance of third-party payments on Civil servants salary-backed loans
Download the full 2022 National Budget Highlights here.