KALONDE NYATI, Lusaka
THE suspension of mine production by Mopani Copper Mines and Luanshya Mine will depress economic growth and reduce proceeds from exports and royalties, Moodyâ€™s has observed.
Moodyâ€™s, a rating agency and investor advisor, says the recent announcement by Glencore, which owns Mopani copper mines in Kitwe and Mufulira, and the decision by Chinaâ€™s Luanshya Copper Mines plc to interrupt operations at its Baluba mine on the back of falling copper prices on the global market, will also put pressure on the sovereignâ€™s fiscal and external positions.
According to a statement issued by senior editor for media relations Peter Griffiths, Zambiaâ€™s growth prospects are being undermined by global trends, and the developments in the mining and energy sector, will worsen the situation.
â€œZambia is already facing challenges from subdued global copper demand, depressed copper prices, which Moodyâ€™s expects to persist, and drought-induced electricity shortages. The suspension of some mining operations now introduces downside risk to the governmentâ€™s revised growth projections,â€ the statement reads.
Moodyâ€™s observes that lower growth and tax revenues will negatively pressure governmentâ€™s already rising budget deficit and debt levels.
â€œAlthough copper production contributes only about 10 percent of total value added , it generates more than two thirds of export revenues and, under a new tax regime in Zambia, about 20 percent of tax revenues, or the equivalent of three percent of GDP [gross domestic product]â€.
â€œLower growth and tax revenues will negatively pressure the governmentâ€™s already rising budget deficit and debt levels, continuing a trend of missed fiscal targets that were among factors behind our May 29 decision to assign a negative outlook,â€ Moodyâ€™s says.
The rating agency also projects that next yearâ€™s fiscal deficit will widen by an additional 0.75-1.00 percentage points of GDP owing to the reduced copper tax base alone.
Reduced export proceeds will further exacerbate the trade deficits that have emerged in recent months.
KALONDE NYATI, Lusaka