Inflation shoots up, hits 8.8%!

The depreciation of the Kwacha has continued to fuel imported inflation as most consumer goods are imported in Zambia. Moreover, the recently hiked prices buying price for maize by the food reserve agency – FRA has signaled a general increase in the staple food – Maize prices across the country, further  weighing down on the national inflation rate.

According to the latest monthly bulletin, the year on year inflation rate as measured by all items Consumer Price Index – CPI for the month of July 2019 has continued on an upward trajectory and increased to 8.8% from 8.6% recorded in June 2019.

Addressing the media in Lusaka on July 25th 2019, Central Statistical Officer Acting Director of Census and Statistics Goodson Sinyenga announced that increase in the annual rate was attributed to both food and non- food items price movement.

Sinyenga told the Zambian Business Times – ZBT that the increase in annual rate of food inflation was attributed to prices increase in food products such as Breakfast meal, Roller Meal, Maize gran, Sampo, Bread, Bun and rice imported. Zambia, with dependence on rain fed Agriculture was adversely affected in the 2018/2019 farming seasons due to low rainfall patterns across some key maize producing regions.

For the increase in non-food annual rate of inflation, the data collected shows that it was mainly attributed to price changes in clothing items. Zambia largely relies on imported clothing and apparel, which are all affected by the depreciation of the Kwacha. There has also been a general raise in imported products retail prices with the majority of Zambians having their earnings in Kwacha, which now commands a lower purchasing power.

Meanwhile, the provincial annual inflation rate for July 2019 increased for Central, Copperbelt, Eastern, Luapula, North Western and Western provinces while it decreased for Northern and Southern provinces.

Sinyenga further disclosed that Western Province had recorded the highest rate for annual inflation at 10.4% followed by Southern Province at 9.4% while Northern province recorded the lowest annual rate of inflation at 7.1%.

“At provincial level, Lusaka province recorded the highest contribution of 2.7 percentage points to the overall annual inflation rate of 8.8% recorded in July 2019 and this implies that the price movements in Lusaka Province had the highest influence to the overall annual rate of inflation, Copperbelt had the second highest contribution of 1.9 percentage points and Northern Western Province had the lowest contribution of 0.3 percentage points,” he said.

The Acting Director also disclosed that the Month on Month inflation rate for July 2019 was recorded at 0.5 percentage points, down from 0.7 percentage points increase recorded in June 2019. This was indicating 0.5 percent difference of prices of goods and services between June and July 2019.

The Zambia Association of Manufacturers – ZAM has called for deliberate policies which would encourage local manufacturing especially of consumer goods to mute the impact of imported inflation and protect the purchasing power for the majority locals whose earnings and savings are in Kwacha.

The Zambia through the Bank of Zambia – BOZ had set a target inflation rate band of 6 to 8% and this is now being breached. Failure to reign in inflation in good time will spell doom to the economy and further crush the purchasing power of the majority of local citizens and businesses.

The depreciation of the Kwacha has continued

Get an IMF supported economic program – CPG

Chairman of the Cooperating Partners Group – CPG, German Head of Development Cooperation Christoph Fritz has urged newly appointed  Minister of Finance Dr. Bwalya Ngandu to continue with the country’s efforts towards acquisition of an IMF Supported Economic Programme in order to expand the financing options available to Zambia by way of support from other cooperating partners.

Speaking when Cooperating Partners Group – CPG paid a courtesy call on the finance Minister in Lusaka on June 23th 2019, Dr. Ng’andu said there is need for immediate action to push policy implementation as required by the country.

Finance Minister Bwalya Ng’andu says his job honeymoon is short as the terms of reference given to him by the Republican President to stabilize and grow the economy offer limited room for delay.

“Hard and smart work is beckoning, the need for action is immediate, my honeymoon is short and my Ministry will require your unfettered support to push policy implementation and get work done,” he told the CPG delegation.

Dr. Ng’andu however pledged to meet all the partners individually in order to reach common ground on areas that need attention in order to stimulate faster implementation of development programmes.

The Cooperating Partners have restated their commitment to support the implementation of the Seventh National Development Plan and the delegation has reaffirmed their support towards building a strong partnership with the Zambian Government.

Christoph Fritz on behalf of CPG further expressed emphasized the need for the Zambian Government to implement austerity measures as it is a very important message to the international community because it demonstrates the resolve of the authorities in taking corrective measures in the country’s progression towards fiscal health.

Among the other issues discussed in the courtesy meeting were debt management, financial governance, private sector development, value for money public investments, protection of social spending, and drought responsiveness.

Further, the cooperating partners listed the e-voucher programme and the economic stabilisation and growth reforms among the issues that need the closer attention of the Zambian Government.

Contributing to the proceedings, African Development Bank Country Manager Mary Monyau announced the banks approval of a support package that will help Zambia with capacity improvement in domestic resource mobilization and debt management.

Newly appointed Minister Dr. Ng’andu has taken a hot job and market players are eagerly waiting to see what new policy emphasis will be pursued more vigorously than the others. He is currently handling a delicate situation as market players line up to try to influence the policy direction.

Various international and local players are jostling to meet him to try and influence the country’s economic direction of policy in their respective interests and it remains to be seen which direction the new minister will tilt towards. He gave a hint at his swearing in that most policies are already there and its more the implementation that the availability of credible policies that is lacking.

Chairman of the Cooperating Partners Group -

World Bank urges Zambia to undertake bold fiscal consolidation

The World Bank has called for the Zambian government to undertake bold fiscal and structural policy reforms to preserve macroeconomic stability, boost business and market confidence, and improve its growth prospects for 2019 and beyond in line with the Zambia Plus economic program.

The latest World Bank’s Economic Brief on Zambia has indicated that Zambia’s path to economic recovery remains weak, reflecting both exogenous and policy uncertainties.

The brief has indicated that despite the Zambian economy growing by 3.7 percent in 2018 from 3.5 percent in 2017, a stronger recovery was undermined by lower crop harvest and fiscal slippages that led to the accumulation of new public expenditure arrears and high government borrowing that impacted private sector activity.

Speaking at the launch of the economic brief in Lusaka last week, World Bank Senor Economist Samson Kwalingana said under the current policies, growth is forecasted to weaken to 2.5 percent in 2019 and remain below 3 percent over the medium-term while inflation remained within the authorities’ target range of 6-8 percent in 2018, averaging 7.5 percent for the year, pressures are now mounting, leading the central bank to tighten its monetary policy stance in May 2019 for the first time in over two years.

The brief also suggests some policy options including (i) front-loading fiscal consolidation to return to medium risk of debt distress and create fiscal space for inclusive growth and strengthening debt management to reduce the debt service burden and minimize debt-related vulnerabilities.

In addition it suggests rebuilding foreign exchange reserves to buttress external stability, and implementing plans to improve the financial and operational sustainability of electricity utility ZESCO and enhance the transparency of of operations and performance of State-Owned Enterprises (SOEs).

The report highlights multiple opportunities that Zambia’s abundant renewable natural resources present to support sustainable economic growth. “Zambia’s economy has thus far been dominated by discoveries, expansion, and fluctuations in the minerals sector, but going forward, the country needs to harness its renewable natural resource endowment to promote sustainable growth”.

“While the contribution of renewable resources like agricultural land, forestry and fishing to GDP has declined in recent years, the sector’s linkages with the rest of the economy remain significant,” said Ina Ruthenberg, World Bank Country Manager for Zambia.

Zambia has recently undertaken a change in Finance Minister, with former Bank of Zambia Deputy Governor Dr. Bwalya Ngandu taking over from ex-banker Magerate Mwanakatwe. The move has largely being welcome by the markets and more is expected from the new minister.

The World Bank has called for the

Sales tax implementation will go ahead! – Dr. Ng’andu

Newly appointed Minister of Finance Dr. Bwalya Ng’andu has confirmed that the implementation of sales tax is on and that government is currently addressing issues raised from the consultation process.  This confirmation follows an earlier hint he gave after he was sworn in as replacement for Magerate Mwanakatwe by President Lungu when he  indicated that the timing of implementation would need to be reviewed which led to speculation that the Goods and Services Tax – GST may be scrapped off completely.

Dr. Ng’andu has explained that having finalized countrywide consultations on the switch from Value Added Tax – VAT to Sales Tax , the ministry has taken into consideration concerns raised which include cascading effects due to multiple value chains, the need to avoid loss of employment due to possibilities of value chains dying off , the timing of introducing of the tax and the need to protect manufacturers.

Responding to a question raised by the Zambian Business Times – ZBT during a public briefing the performance of the Zambian economy in the second quarter (Q2) of 2019 on June 17th 2019 in Lusaka, the Minister said concerns raised will be addressed as the process evolves in Parliament.

The added that the Ministry has issued a request for proposals for tax and non-tax measures for consideration in the 2020 national budget and has since appealed to all concerned members of the public to submit their proposals to the Ministry for consideration.

“The Switch from VAT to sales tax is progressing in Parliament as I earlier indicated and the completion of audits for large tax payers particularly in the mining sector is being done. However, Zambia will implement the sales tax provided we analyze issues that have been raised by some stakeholder during the consultation process,” he said.

He further said the implementation of the Land tilling programme will soon result in an increased pace in issuance of land titles as most challenges have now been resolved. Title deeds are essential not only for the social aspect of security property rights, but also for the growth of the property market as well as a key source of revenue through property transfer tax – PPT through the Zambia Revenue Authority.

Meanwhile, giving an update of the performance of local currency, the Kwacha, Dr Ng’andu disclosed that the exchange rate of the Kwacha against major tradable currencies generally depreciated in the second quarter of 2019, relative to the first quarter and that the depreciation was largely on account of elevated demand for foreign currency mostly for the purchase of petroleum products compounded by subdued supply.

He added that the Kwacha depreciated by 7.6% against the US Dollar, trading at an average of K12.83 per US Dollar from K11.96 during the first quarter of 2019 adding that it also depreciated by 6.1%, 6.5% and 4.9% against the British Pound, the Euro and the South African Rand, respectively.

The Minister, who was the erstwhile Bank of Zambia Deputy Governor said government remains committed to continue engaging stakeholders in interactions with regard to growing the country’s economy and come up with solutions to the challenges being faced. There is great expectations from the new Finance Minister as he has moved into office when the economic sentiment is at its lowest ebb.

Newly appointed Minister of Finance Dr. Bwalya