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World Bank tips Zambia on economic recovery

KABANDA CHULU, Lusaka
THE World Bank has advised Zambia to overcome the current economic slowdown by ensuring that every Kwacha counts in government expenditures through removal of fuel and electricity subsidies that accounts for over US$500 million annually.
The bank also suggested that the social cash transfer system should be scaled-up to accompany any subsidy removal and provide better support to the poorest households.
Among the ideas proposed to beat the economic slowdown are: eliminating fuel subsidies, improving financial sustainability of the power sector, protecting the poor by scaling-up the social cash transfer system, and improving efficiency in public expenditures to result in long-term inclusive growth.
World Bank country manager Ina-marlene Ruthenberg said there remains a need to look closely at public expenditure and ensure that its allocation and quality is improved.
“By making every Kwacha count, a return to faster growth will be expedited, and growth itself can be made more inclusive to support households’ escape from poverty and to ensure prosperity is better shared in Zambia,” she said.
And according to a mid-year economic brief for Zambia titled ‘Beating the slowdown: Making every Kwacha count’ a key area of under utilised expenditure is the government subsidy of fuel and electricity.
“It is estimated that fuel subsidies have averaged close to US$36 million per month between September 2015 and May 2016, and electricity subsidies around US$26 million per month, resulting in a combined total of US$576 million that is putting pressure on the budget,” it stated.
It stated that the power crisis has revealed the importance of ensuring that the industry has sufficient funds for electricity service provision.
“Inadequate electricity tariffs limit the extent to which the existing generation and grid network is maintained and the extent to which investments in new generation capacity and network expansion by either Zesco or private parties can be made. Furthermore, the cost of subsidising the sector creates significant fiscal pressures.”
“The government’s social cash transfer system should be scaled-up to accompany any subsidy removal and provide better support to the poorest households,” it stated.

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