May inflation breaches 6 to 8% target range for 2019.

Zambia’s inflationary rate has recorded a 0.4% increase, resulting in the year on year inflation for May 2019 to increase to 8.1% from 7.7%recorded in April 2019. This raise has breached the target bound inflations rate the country which was announced to be the range between 6 to 8%.

Analyst say the current depreciation of the Kwacha which the Central Bank – BOZ has exhibited limited to no innovation to manage in terms of stability in the short term is further expected to put more upward pressure on prices via imported inflation as well as psychological price increases as this bout of currency instability continues.

Addressing the media at Central Statistics Office (CSO) attended by the Zambian Business Times – ZBT, Acting Director of Census and Statistics Daniel Daka said the increase in the annual rate of inflation was mainly attributed to upward price movements in food item such as dried fish, dried Kapenta (Mpulungu, Siavonga and Chisense), meat and Vegetable.

Of the 8.1 percent annual inflation rate recorded, Food and Non-alcoholic beverages accounted for 4.8 percentage point while non-food items accounted for a total of 3.3 percentage point. Of the 3.3 percentage point, transport contributed the highest at 1.0 percentage point followed by housing, water, electricity gas and other fuels at 0.7%.

At provincial level, Lusaka Province recorded the highest contribution to national inflation at 2.4 percentage points to the overall annual inflation rate of 8.1 percent. This implies that the price movement in Lusaka Province had the greatest contribution to the overall annual rate of inflation.

Copperbelt Province had the second highest contribution of 1.7 percentage points while North Western Province has the lowest contribution of 0.3 percentage points.

The year of year food inflation rate for May 2019 has also recorded a 0.8 percentage points at 9.1 percent compared to 8.3 percent recorded in April 2019. This increase in mainly attributed to price change in production such as Vegetables and fish products.

The food inflation rate increase has been attributed to climate change effects which has affected some key Agro provinces such as Southern, western and parts of Lusaka provinces which have experience low rainfall.

Rain-fed and rain dependent traditional agriculture  practices continue to be the largest hindrance in times of below normal rainfall with efforts to diversify and increase the irrigated hectarage receiving a start and stop drive.

Upward inflationary risks remain high as non food items which are imported are expected to weigh in for the coming months. Though the Kwacha to rand volatility has been muted and the fact that Zambia’s imports of consumer goods are mostly from South Africa, the effects may be lessened though retailers are expected to hike prices taking advantage of the volatility in the Kwacha to US dollar and Kwacha to Pound Sterling volatility.

Zambia’s inflationary rate has recorded a 0.4%

Ministry of finance for the second time announced austerity measures

Zambia’s highest decision making organ, the Cabinet which is composed of ministers has directed that the ministry of Finance submits a list of loans to be considered for cancellation, postponement or slowdown as a measure to address external and domestic debt.

Minister of Finance, Magerate Mwanakatwe has also been directed to present to cabinet at its next sitting a list of project loans to be considered for slowing down, postponing and cancellation. In doing so, projects that are of an economic nature will not be cancelled as resumption of growth is important to address the current challenges.

Minister of Finance Margaret Mwanakatwe has disclosed at a media briefing that “in view of the prevailing economic situation that the country is going through, the president called for an urgent Cabinet Meeting on Monday 27th May 2019 at state house to get a full brief on the state of the economy.

President Lungu further engaged cabinet and his top ministers to decide on measures to be taken to restore the macro-economic stability, debt sustainability and ensure that growth is restored on an upward trajectory for the benefit of Zambians.

The finance minister stated that cabinet directed that legal reforms such as the enactment of a new public procurement law should be hastened to ensure value for money and that ministries should improve on contract management.

Cabinet also directed that no Ministry, Province or Spending Agency should contract for goods and services without availability of funds even if it is budgeted for, to stop the accumulation of arrears. To this effect the Treasury was directed to issue strict guidelines on the matter.

The minister says the treasury was also directed to ensure that the measures above are implemented expeditiously to facilitate the sourcing of external funds to finance critical expenditure in the 2019 budget that are required to support growth.

The fiscal side of economic management has been sited as the weakest link in Zambia’s macro-economic management system with analyst calling for professionalism of this important aspect needed to stabilize the country’s performance.

Zambia’s highest decision making organ, the Cabinet

AfCFTA faces known pitfall of regional integration – non tariff barriers

Zambia’s trade minister, Christopher Yaluma has cautioned that despite the hype and optimism regarding the implementation of the African Free Trade Area – AfCFTA, there are still challenges that African countries will need to overcome in order reap the full benefits of the agreement.

He said that Zambia must prepare itself with challenges that are expected to arise from ensuing non-tariff barriers. The trade minister stated that “as experience has shown from integration in the regional organisations such as COMESA and SADC, as the countries drop their tariffs, non-tariff barriers become a new challenge to contend with. Zambia will therefore need to develop an affective national committee for non-tariff barriers in order to deal with this issue,”

Yaluma added that the AfCFTA is expected to liberalize trade in goods and services for African countries and extends its coverage to investment, competition policy and intellectual property rights. He acknowledged that once the AfCTA is operational, Africa will be the largest trading bloc in the world as the continent brings together 55 countries with a combined population of more than one billion people and a combined gross domestic of more than US$3.4 trillion.

Meanwhile, the United Nations Economic Commissions for Africa – UNECA has called on the Zambian government to consider ratifying the African Continental Free Trade Area – AfCFTA which is expected to provide huge market access for the produce and contribute to creation of jobs and wealth for Zambia and all African countries.

Speaking during the National Consultative Forum for AfCFTA held in Lusaka on May 23rd 219, UNECA director Prof Said Adejumobi said the AfCTA if successful, Africa’s manufacturing sector will double in size with annual output increasing from US$500 billion in 2015 to US$1 trillion in 2025 and contributing additional 14 million stable jobs.

The UNECA director said the AfCFTA will create the biggest free trade area in the world with a market of more than 1.29 billion people and a combined GDP of more than US$ 2.5 trillion. He added that the treaty has massive opportunities for increasing intra-regional trade, enhancing production, promoting economies of scale, creating jobs, raising incomes and improving the standard of living of the African people.

“The AfCFTA in one of the flagship projects of Agenda 2063, especially its 10-year implementation plan which seeks to promote inclusive and sustainable economic growth and accelerated economic development and integration in Africa. However, it must be backed up by increased production capacity, enhancing regional value chains and removing internal obstacles to the growth of SMEs so that African countries can compete well in the liberalized regional market,” he said.

A look at existing trade blocks such as SADC, COMESA, ECOWAS etc shows that though some limited progress has been made, inter-Africa trade remains a big challenge and faces well established colonial trade links and connections competition in the lines of Anglophone and Francophone. It’s not strange to find a former French colony importing  fruit and vegetables from day France and Belgium when those same products can be fetched at half the price from a fellow Afro neighboring country.

Successive African governments due to seeking campaign funding from mostly foreign interests and lobby organizations continue to fail to unlock the trade barriers. The example we have in Zambia is where petroleum products continue being imported from the gulf region when neighboring country Angola is a major oil producer in Africa.

Angola on the other hand imports fruit and vegetables and poultry products from Portuguese connected companies in Brazil when neighboring Zambia can produce these same products at a third of the price cutting out huge transportation costs and support inter country enterprise.

Efforts by locals residing in boarder towns to involve in small to medium scale cross boarder trading is met with daft government officials who when crafting policies simply ignore the need to nature and grow there very small and medium size companies to large scale import and export companies. They are usually termed as smugglers due to no legal provision and operating space.

 

Zambia’s trade minister, Christopher Yaluma has cautioned that

Declined forex supply by Copper mines linked to Kwacha slide – BOZ

Bank of Zambia – BOZ Governor Dr. Kalyalya disclosed in response to a question from the Zambian Business Times – ZBT that supply of forex from the mine has been declining failing to US$435.1 million in the first quarter of 2019 compared to US$683.1 million in the first quarter of 2018.

He explained that the trend has been downwards hence the need for diversifying export earnings being an imperative. He warned that if the country continues to rely on copper mining companies alone, the country will risk ending up having constraints in the supply of foreign exchange.

In addition, the governor revealed that this was despite the copper prices having held up and slightly increased to US$6,226 per metric tonnes in the first quarter of 2019 compared to US$6,164 in the last quarter of 2018 but projections going forward suggest that there could be some risks to the price.

The Bank of Zambia – BOZ has urged Zambians and especially those with the innovative and business acumen to set up and develop firms that can locally produce goods and services, and later export to step up and help alleviate the Kwacha slide which has massively been weakened relative to other major international convertible currencies.

Responding to another question raised by the Zambian Business Times – ZBT, BOZ governor Dr. Denny Kalyalya stated that the movement in the Kwacha value relative to other currencies  is affected by the balance between the supply and demand of foreign exchange and that the Kwacha’s fundamental strength is determined by economic activities of Zambian people in the country.

A review of the BOZ Monetary Policy Committee – MPC report also indicated that since the beginning of the second quarter of 2019, the Kwacha has been under severe pressure depreciating by 14.9% against the US dollar.

Dr. Kalyalya has attributed the depreciation of Kwacha to elevated demand for petroleum imports, reduced supply for foreign exchange and negative market sentiments. He further mentioned that the Kwacha was relatively stable in the first quarter of 2019 weakening marginally by 0.6% to an average of K11.95/US dollars.

And BOZ Deputy Government Dr. Bwalya N’gandu said the central bank is in the process of calibersring the amount of Kwacha available to those participating in the market as a measure to aid of strengthening and balancing of the local currency, the Kwacha.

Dr. Ng’andu said the central bank will continue to do its best to stabilize the Kwacha and also reiterated the need by local economic players to play their role in order to calm the situation.

“We will go into the foreign exchange market with dollars but the idea is not to change the direction of the currency because that will be determined by the fundamental relationship between supply and demand, BOZ will just deal with fluctuations and look at how to flatten them. We will do our part to stabilize the currency and we expect economic players to do their own as well,” he said without pointing out the actual players he referred to.

 

Bank of Zambia - BOZ Governor Dr.