Inflation seen at 12 pct in 2009, 8 pct in 2010
Zambia sees 2010 growth over 5 pct, debt rises
Borrowing rises to 3 pct of GDP, seen at 2 pct in 2010
October 9, 2009
Zambia's economy should grow more than 5 percent in 2010 from a projected 4.3 percent this year, but government will have to raise borrowing this year due to less donor funding, Finance Minister Situmbeko Musokotwane said on Friday.
In a budget speech to parliament, he said domestic borrowing in Africa's biggest copper producer would rise to 3 percent of GDP in the current financial year from a targeted 1.8 percent, before easing to 2 percent of GDP in 2010.
Musokotwane also lifted the forecast for 2009 inflation to 12 percent from the current prediction of 10 percent, adding inflation should ease to 8 percent next year.
"The government's macroeconomic objectives for 2010 are to exceed 5 percent growth, to reduce end-year inflation to 8.0 percent and to limit domestic borrowing to 2.0 percent of GDP."
Officials had warned that the government may have to raise taxes or debt to help plug a budget gap, due to an expected dip in donor funding, which usually forms a big part of the country's spending plans.
Donors are worried about a perceived lack of urgency in tackling corruption, while a change in the budget cycle to calendars years from April to March may also have affected pledges.
Musokotwane said the government had increased domestic borrowing in 2009 while cutting spending to lower priority areas to ensure money for key sectors, such as health, education and roads.
"As a result, domestic borrowing is projected to increase to 3.0 percent of GDP from earlier estimates of 1.8 percent."
He said Zambia planned a 16,717.8 billion kwacha (R26.5 billion) budget in 2010, with donors expected to cover about 14.5 percent of that in grants, and 13.1 percent financed through internal and external borrowing.
Western funders usually finance about 25 to 30 percent of budget spending.
Donors are unhappy that the government blocked prosecutors from appealing former president Frederick Chiluba's acquittal on graft charges, and some donors froze aid earlier this year after money meant for health was stolen.
The previous budget, for April 2009 to March 2010, was $3 billion.
Musokotwane said a key focus from 2010 was to lift economic growth back to the average 7 percent a year achieved before the global economic downturn.
"This will be done by continuing with our economic diversification programme, thereby laying a solid foundation for higher sustainable growth and building resilience to external shocks," he said.
Zambia, which is trying to diversify its economy from copper mining to mainly agriculture, manufacturing and tourism, has created two huge farm blocks with a total of 150 000 hectares, to try attract foreign investors.
Musokotwane said copper production, which had been forecast at 664 000 tonnes this year would now be around 662 000 tonnes but he gave no reason for the downward revision. Production was 575 000 tonnes in 2008. - Reuters
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