ECONOMIC REVIEW 2015 MID-YEAR - PMRCZAMBIA · 2015-07-30 · TREASURY INFOGRAPHIC DEBT RATIOS OF...
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REVISED ECONOMIC GROWTH 3 Decline in prices of most traded commodities: Non-traditional exports Fall in Copper price Decline in output of a number of crops Delays in completion of electricity generation stations EXPECTED ECONOMIC GROWTH TARGET Global economic growth for 2015 has been revised downwards to 3.8 percent from the earlier projection of 5.8 percent. The slowdown coupled with the strengthening of the United States dollar DEBT POLICY 4 MONETARY POLICY 5 EXTERNAL SECTOR DEVELOPMENTS 6 MINISTRY OF FINANCE ECONOMIC REVIEW 2015 MID-YEAR Given this reduced growth and the lower revenue from the mining and external grants over the reviewed period, it is vital that we make some adjustments to the 2015 budget provisions. Further, threats from the external environment are still a reality as the global economic outlook remains uncertain and generally fragile. There is thus need for decisive and focused action in order for us, as a nation, to stay on course with economic transformation and the improvement in the lives of our people. MINISTRY OF FINANCE Lengthening the period for capital projects implementation, particularly in the road sector; Reducing spending on goods and services in the public service so as to invest more in capital projects; Improving efficiency in the implementation of FISP and FRA; Ensuring implementation of full cost recovery of domestic fuel pump prices; and Enactment of the Planning and Budget Act that will bring about prudence in spending P. O. Box 50062 Chimanga Road, Lusaka Phone: +260 211 251843 250657, 253786 Fax: +260 211 251078, 254335, 254995, 251204 Email: [email protected] THE 2015 BUDGET 1 GENERAL PUBLIC SERVICES ZMW 12 Billion allocated of which ZMW 5.1 Billion (44%) is to service domestic and external debt obligations. ECONOMIC AFFAIRS ZMW 12.7 Billion allocated of which ZMW 5.6 Billion (44%) is allocated for road infrastructure, including the Link Zambia 8000 and Pave Zambia 2000 projects. PUBLIC ORDER AND SAFETY ZMW 2.2 Billion allocated for tasks involving the modernisation of security wings, staff recruitment and rehabilitation of prison infrastructure. HEALTH ZMW 4.5 Billion allocated of which ZMW 52.2 Million is allocated for the recruitment of over 2000 health personnel. SOCIAL PROTECTION ZMW 1.2 Billion allocated of which 64% is for the Public Service Pension Fund. EDUCATION ZMW 9.4 Billion allocated of which 68% is for the recruitment of 5000 teachers and sustaining existing establishments and ZMW 1.1 Billion (11%) for early childhood, primary and secondary education infrastructure development. HOUSING AND COMMUNITY AMENITIES ZMW 799 Million allocated of which ZMW 541 Million (68%) is allocated for the rehabilitation and construction of water supply and sanitation infrastructure. RESOURCES Expected resources of ZMW 47.9 Billion of which 67% should be funded by tax revenue. TAX Mining fiscal regime was revised to include mineral royalty taxes of 8% for underground mining and 20% for open cast mining, corporate income tax of 0% on income from mining operations and 30% on incoming earned from tolling and processing of purchased mineral ore or concentrates. MACRO-ECONOMIC OBJECTIVES FOR 2015 Achieve a real GDP growth of above 7% Achieve end year inflation of no more than 7% Increase international reserves to at least 4 months of import cover Raise domestic revenue collections to at least 18.5% of GDP Limit domestic borrowing to no more than 2% of GDP Accelerate economic diversification and continue to create decent jobs especially for the youth Accelerate implementation of health, education, water and sanitation sector interventions AGRICULTURE MANUFACTURING TOURISM MINING Import drops at 27% Import drops at 27% in 2015, due to reduced capital goods and Exports droped to 31.2% From 3.35 million metric tons in the 2013/2014 farming season to 2.62 million metric tons in the 2014/2015. Maize output is expected to decline by Projected growth driven by Agro processing, Electricity, Construction and Packaging Projected growth driven by both domestic and foreign INFLATION INTEREST RATES IMPORT/EXPORT K 100 The Bank of Zambia raised the Commercial Banks’ statutory reserve ratio to from 14 percent to counter pressures on the exchange rate mainly in the first quarter of the year. The average lending rate and average savings rate for amounts above were relatively unchanged around 20.5 percent and 3.4 percent respectively Policy Rate at EXCHANGE RATE The Kwacha depreciated by and 12.6 percent against the US dollar and the Rand, respectively, to end the quarter $ 405.2 The developments in the balance of payments for the first quarter of 2015 were unfavourable as the overall BOP deficit widened to This was largely on account of unfavourable performance in both the current and financial accounts, which in turn were adversely affected by the sluggish performance of the global economy. MILLION $ 131.9 MILLION Zambia’s external debt currently stands at US$4.8 billion representing about 18.5 percent of GDP while the domestic debt is K20.5 billion (approximately US$3.7 billion) representing about 14.2 percent of GDP. This position was confirmed by the results of the Debt Sustainability Analysis (DSA) undertaken in June 2014. Total public debt of GDP ©2015, Ministry of Finance MINISTRY OF FINANCE TREASURY INFOGRAPHIC DEBT RATIOS OF GDP External Debt Domestic Debt DEBT MANAGEMENT External Debt currently on US$4.8 Billion 18.5 percent of GDP 2013 2014 2015 15% 18.3% 18.5% 16.3% 16.8% 14.1% CONCLUSION WAY FORWARD REVISED FISCAL POLICY 2 5.8% of GDP target Actual Budget deficit 6.9% of GDP IMF Forecast 5.6% of GDP 6.9% INDICATORS Preliminary data indicators for 2015: The budget deficit was approximately 6.9% of GDP, compared to the target of 5.8% of GDP. REVENUE VS EXPENDITURE In 2014 domestic revenue was estimated at 18.7% of GDP. Expenditures were 26.9% of GDP, with wages and salaries at approximately 9% GDP and Government investment at 5.8% of GDP. 26.9% 18.7% VS. EXPENDITURES REVENUE EXTERNAL SIDE Developments in the domestic and external economies have exerted unforeseen pressure on the implementation of the Budget, resulting in serious adverse consequences for both revenues and expenditures. Drop in copper prices has led to a reduction in projected tax collections from the mining sector while foreign exchange earnings have reduced. Kwacha depreciation has largely resulted in higher external debt service payments and the cost of maintaining and running Zambian missions abroad. DOMESTIC SIDE the rise in interest rates in the domestic financial market, arrears on road sector projects, the purchase of crops for the 2013/2014 farming season, Kafue Bulk Water Supply Project, payment of fuel arrears and for the holding of the Presidential bye-Election. Total expenditures are projected to increase by K13.43 billion beyond Budget. BUDGET PRESSURES Projected that the sector would grow by above Export drops at 31.2%
Transcript of ECONOMIC REVIEW 2015 MID-YEAR - PMRCZAMBIA · 2015-07-30 · TREASURY INFOGRAPHIC DEBT RATIOS OF...
REVISED ECONOMIC GROWTH
3
Decline in prices of most traded commodities:
Non-traditional exports
Fall in Copper price
Decline in output of a number of crops
Delays in completion of electricity generation stations
EXPECTED ECONOMIC GROWTH TARGET
Global economic growth for 2015 has been revised downwards to 3.8 percent from the earlier projection of 5.8 percent.
The slowdowncoupled with thestrengthening of
the UnitedStates dollar
DEBT POLICY4
MONETARY POLICY5
EXTERNAL SECTOR DEVELOPMENTS
6MINISTRY OF FINANCE
ECONOMIC REVIEW 2015 MID-YEAR
Given this reduced growth and the lower revenue from the mining and external grants over the reviewed period, it is vital that we make some adjustments to the 2015 budget provisions. Further, threats from the external environment are still a reality as the global economic outlook remains uncertain and generally fragile. There is thus need for decisive and focused action in order for us, as a nation, to stay on course with economic transformation and the improvement in the lives of our people.
MINISTRY OF FINANCE
Lengthening the period for capital projects implementation, particularly in the road sector;Reducing spending on goods and services in the public service so as to invest more in capital projects;Improving efficiency in the implementation of FISP and FRA;
Ensuring implementation of full cost recovery of domestic fuel pump prices; andEnactment of the Planning and Budget Act that will bring about prudence in spending
P. O. Box 50062Chimanga Road, Lusaka
Phone: +260 211 251843 250657, 253786Fax: +260 211 251078, 254335, 254995, 251204
Email: [email protected]
THE 2015 BUDGET1
GENERAL PUBLIC SERVICESZMW 12 Billion allocated of which ZMW 5.1 Billion (44%) is to service domestic and external debt obligations.
ECONOMIC AFFAIRSZMW 12.7 Billion allocated of which ZMW 5.6 Billion (44%) is allocated for road infrastructure, including the Link Zambia 8000 and Pave Zambia 2000 projects.
PUBLIC ORDER AND SAFETYZMW 2.2 Billion allocated for tasks involving the modernisation of security wings, staff recruitment and rehabilitation of prison infrastructure.
HEALTHZMW 4.5 Billion allocated of which ZMW 52.2 Million is allocated for the recruitment of over 2000 health personnel.
SOCIAL PROTECTIONZMW 1.2 Billion allocated of which 64% is for the Public Service Pension Fund.
EDUCATIONZMW 9.4 Billion allocated of which 68% is for the recruitment of 5000 teachers and sustaining existing establishments and ZMW 1.1 Billion (11%) for early childhood, primary and secondary education infrastructure development.
HOUSING AND COMMUNITY AMENITIESZMW 799 Million allocated of which ZMW 541 Million (68%) is allocated for the rehabilitation and construction of water supply and sanitation infrastructure.
RESOURCESExpected resources of ZMW 47.9 Billion of which 67% should be funded by tax revenue.
TAXMining fiscal regime was revised to include mineral royalty taxes of 8% for underground mining and 20% for open cast mining, corporate income tax of 0% on income from mining operations and 30% on incoming earned from tolling and processing of purchased mineral ore or concentrates.
MACRO-ECONOMIC OBJECTIVES FOR 2015
Achieve a real GDP growth of above 7%
Achieve end year inflation of no more than 7%
Increase international reserves to at least 4 months of import cover
Raise domestic revenue collections to at least 18.5% of GDP
Limit domestic borrowing to no more than 2% of GDP
Accelerate economic diversification and continue to create decent jobs especially for the youth
Accelerate implementation of health, education, water and sanitation sector interventions
AGRICULTURE MANUFACTURING TOURISM MINING
Importdrops at
27%
Import drops at 27% in 2015, due to reduced capital goods and Exports
droped to 31.2%
From 3.35 million metric tons in the 2013/2014 farming season to 2.62 million metric tons in the
2014/2015. Maize output is expected to decline by
Projected growth driven by Agro processing, Electricity, Construction and
Packaging
Projected growth driven by both domestic and foreign
INFLATION
INTEREST RATES
IMPORT/EXPORT
K100
The Bank of Zambia raised the Commercial Banks’ statutory reserve
ratio to
from 14 percent to counter pressures on the exchange rate mainly in the first
quarter of the year.
The average lending rate and average savings rate for amounts above
were relatively unchanged around 20.5 percent and 3.4 percent respectively
Policy Rate at
EXCHANGE RATE
The Kwacha depreciated by
and 12.6 percent against the US dollar and the Rand, respectively, to end the
quarter
$405.2
The developments in the balance of payments for the first quarter of 2015 were unfavourable as the overall BOP
deficit widened to
This was largely on account of unfavourable performance in both the
current and financial accounts, which in turn were adversely affected by the sluggish performance of the global
economy.
MILLION
$131.9 MILLION
Zambia’s external debt currently stands at US$4.8 billion representing about 18.5
percent of GDP while the domestic debt is K20.5 billion (approximately US$3.7
billion) representing about 14.2 percent of GDP.
This position was confirmed by the results of the Debt Sustainability Analysis (DSA)
undertaken in June 2014.
Total public debt of GDP
©2015, Ministry of Finance
MINISTRY OF FINANCE
TREASURY INFOGRAPHIC
DEBT RATIOS OF GDP
External Debt
Domestic Debt
DEBT MANAGEMENT
External Debt currently on US$4.8 Billion
18.5 percent of GDP
2013 2014 2015
15% 18.3% 18.5%
16.3% 16.8% 14.1%
CONCLUSIONWAY FORWARD
REVISED FISCAL POLICY
2
5.8% of GDPtarget
Actual Budget deficit6.9% of GDP
IMF Forecast5.6% of GDP
6.9%
INDICATORS
Preliminary data indicators for 2015: The budget deficit was approximately 6.9% of GDP, compared to the target of 5.8% of GDP.
REVENUE VSEXPENDITURE
In 2014 domestic revenue was estimated at 18.7% of GDP.
Expenditures were 26.9% of GDP, with wages and salaries at approximately 9% GDP and Government investment at 5.8% of GDP.
26.9%
18.7%VS.
EXPENDITURES
REVENUE
EXTERNAL SIDE
Developments in the domestic and external economies have exerted
unforeseen pressure on the implementation of the Budget, resulting in serious adverse consequences for both
revenues and expenditures.
Drop in copper prices has led to a reduction in projected tax collections from the mining sector while foreign exchange earnings have reduced. Kwacha depreciation has largely resulted in higher external debt service payments and the cost of maintaining and running Zambian missions abroad.
DOMESTIC SIDEthe rise in interest rates in the domestic financial market, arrears on road sector projects, the purchase of crops for the 2013/2014 farming season, Kafue Bulk Water Supply Project, payment of fuel arrears and for the holding of the Presidential bye-Election.
Total expenditures are projected to increase by K13.43 billion beyond Budget.
BUDGET PRESSURES
Projected that the sector would grow by above
Exportdrops at
31.2%
