IMF projects a 7.7 % real GDP growth for Zambia

The International Monetary Fund (IMF), mission chief for Zambia, Mr. Trevor Alleyne has projected a 7.7 percent real GDP growth for Zambia, reflecting strong growth in copper production and non-maize agriculture, and an expansionary fiscal policy.

He further says for 2012, the current account surplus is projected to remain broadly unchanged, while gross international reserves are expected to continue to grow, reaching the equivalent of 3.3 months of prospective imports.

Mr Alleyne however warned that there are near-term downside risks arising from the uncertain prospects for the global economy and from domestic policies despite the crisis in Europe having little spillover to the Zambian economy to date, a further deterioration in global economic conditions could squeeze trade credit lines; reduce demand for Zambian exports; and lower copper prices.

And On the domestic front,he said the policy measures will be needed to ensure that fiscal targets are met; and careful implementation of the planned financial sector reforms will be necessary to safeguard

financial sector stability.

Mr Alleyne further stated that on the other hand, Zambia’s solid macroeconomic management, the large investments in the copper sector, and recent strong growth in non-maize agriculture all auger well for the country’s ability to withstand global shocks and sustain the growth momentum into the future.

“Maintaining a positive investment climate for current and potential investors should be an

important component of Zambia’s growth strategy. As traditional concessional financing

phases out and Zambia relies increasingly on international markets and foreign direct

investment, it will be important for the government to implement and communicate clearly a

consistent set of policies related to foreign investment. This will enhance Zambia’s

international reputation as a destination for investment flows by reducing uncertainty” he stressed.

“Despite the favorable macroeconomic results, there is an urgent need to re-orient policies to

ensure that economic growth and macroeconomic stability are accompanied by strong

employment growth and poverty reduction. Looking forward, it will be important for the

Government to implement policies to diversify the economy and ensure that growth is more

inclusive. Key areas will include: (1) tax policy, tax administration, and public financial

management to create fiscal space for increased infrastructure spending and improve

technical capacity to efficiently administer a larger capital budget; (2) maize marketing and

pricing policies and the development of a broad-based reform strategy for the agricultural

sector; (3) increasing access to financial services by small and medium enterprises without

jeopardizing financial sector stability; and (4) removing the incentives for the proliferation of

informal business and employment arrangements.”

The 2012 Article IV discussion by the IMF’s Executive Board is expected to take place in

May, 2012.

////////////////////