One of Zambia’s prominent economist, Yusuf Dodia, has urged the Zambian Government to quicken the process of rebasing its Gross Domestic Product – GDP in order to align it with the recent changes that the country’s economy has experienced.
Dodia said despite the country going through difficult times currently, it is important to measure its wealth every after few years to accommodate changes from both the domestic and global economy. GDP annual growth rates have been recorded from 2010 to 2019 and its only in 2020 when we expect the economy to contract to negative growth.
He told the Zambian Business Times – ZBT in an exclusive interview that challenges such as change in copper prices, insufficient electricity, raising inflation rate and the high cost of labor put pressure on the overall GDP number, hence the need to rebase it in order to take these pressures into account and get the net effect.
He added that rebasing GDP further gives a picture of the country’s economy to citizens and explains what is happening on the ground, therefore making it easier for them to know how wealth is generated and who it benefits.
“GDP rebasing is important because it focuses on what goods the country is producing and measuring its value, for instance countries like Zambia where about 80% of our GDP is being produced by less than 10 companies, it cannot directly account for the welfare of more than 17 or 18 million people”.
“Rebasing GDP gives it some level of connection to the domestic economy but we have to be careful with numbers. If we strictly look at it in figures, all Zambians are living as middle income people by GDP per capita term, but the realistic view is that a lot more of our people are poor and generation of the biggest amount of production feeding into the overall GDP number is only coming from the mining sector,” He said.
Dodia has since called on government to find ways of sourcing for funds from its bilateral donors or get into negotiations with its partners as rebasing the country’s GDP is an absolute necessity.
The rebasing of GDP is ideally supposed to be done every after 5 years in a bid to account for changes that have occurred in an economy over time. The rebasing provides government with information on the size and the composition of the economy, however Zambia last rebased its GDP in 2010 and the results clearly revealed that it was understated by 25%, a trend which experts project would be the case if rebasing is done in 2020 or 2021.
From 2010 when the last GDP rebasing exercise was done, Zambia’s largest mining company, First Quantum Minerals – FQM has come on stream, various landmark investments in tourism such as hotels, airports and resorts have since been opened with large Infrastructure projects launched from 2011 to-date are all expected to bolster the overall GDP number.
A revised GDP number also enable the setting of the correct tax revenue and non tax revenue collection targets. Tax revenue collection targets for instance are general set at 18% of GDP if efficient methods are employed.
