Zambia’s Economy on the Low due to Power Shortages and Low Export

Policy instability is continually hurting the economy of Zambia as other local activities and external factors also contributes to this inflection. In view, Mr. Tsidi Tsikata led a team of International Monetary Fund (IMF) staff to assess the economic status of of Zambia while making meaningful inputs towards necessary steps that will help redefine the strength of the economy and also enhance a gradual growth of the economy. Tsidi Tsikata and his team led the study after being invited by authorities of Zambia, the exercise was carried out for close to two weeks.

After the study, Mr. Tsikata made his study known. He said that the economy of Zambia in this year has been slow as growth is estimated at 3% for the whole year. This slow growth was attributed to reduced exports of goods and also critical power cuts which is not favoring production in the country. Also, he mentioned that private sector consumption and investments have reduced for a while now – which affects the economy.

Additionally, it was realized that the country has overspent in fuel and energy subsidies significantly which has reflected in the poor performance in revenues in the first three quarters of 2016. To add to that, government has been issuing some payments to suppliers and other sectors. According to Mr. Tsikata, these payments have been accumulated from the past year and includes areas of payment to contractors. This accumulated areas is expected to rise as the years pass by. By monetary wise and in terms of cash, the deficit in cash is known to be as much as 5% of the country’s GDP; if the payments of accumulated areas is added to this, then the country stands at a deficit amounting to 10% of their GDP. Tins amount is estimated around ZMW 20 billion. Currently, all cash deficits are being handled locally, mainly by borrowing money from the Bank of Zambia.

If requested by authorities, the team will return to Zambia in the coming year to undertake Article IV consultation and program discussions. At large, the team also made known that the current issues affecting the country’s economy can be dealt with through policy action including adjusting prices of fuel to a more cost-reflective rate while creating a space for clearing all arrears, social spending, and minimizing fiscal debts. These steps will enhance the ability of the economy to recover in coming years.

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