THE International Monetary Fund (IMF) has welcomed and described as appropriate Governmentâ€™s decision to significantly reduce the budget deficit in the 2016 national budget.
Zambia is targeting to significantly reduce the budget deficit by 3.1 percent to 3.8 percent gross domestic product (GDP) in 2016 to enable Zambians participate more in various economic activities.
Speaking last Friday when he unveiled the 2016 budget under the theme â€œFiscal consolidation to safeguard our past achievement and secure a prosperous future for allâ€, Minister of Finance Alexander Chikwanda said : â€œThe 2016 macro-economic objectives will be to reduce the budget deficit to 3.8 percent of GDP from 6.9 percent of GDP projected in 2015 and limit domestic borrowing to 1.2 percent of GDP.â€
IMF African department director Antoinette Sayeh said Zambia has bright economic prospects if action on the fiscal front is taken to address the challenges the country is facing.
The challenges are in view of the reduced global commodity prices among other negative factors.
Ms Sayeh said this recently in response to a question by a journalist in Lima, Peru.
â€œWe see the intention (in the budget) to significantly reduce the budget deficit. We welcome that as an appropriate urgent action to take but it is still the case that we need to review those numbers before we can give an assessment of how significant and credible the budget is.
â€œZambia has bright prospects of course if actions can be taken already to address this very difficult time and especially actions on the fiscal front,â€ she said.
Ms Sayeh said that Zambia has been subject to a number of shocks in recent months among them the reduction in copper prices.
â€œCopper constitutes 70 percent of Zambiaâ€™s export earnings and so that has obviously had a significant impact on fiscal position in Zambia and also on economic activity as some mining companies have been hard hit and limiting or reducing their activity.
â€œZambia has also seen a drought as a number of countries in Southern Africa that has had an impact of course on agriculture and food prices rising reflects that in part. The depreciation in Zambiaâ€™s currency very much reflects these developments,â€ she said.
Ms Sayeh said the developments in the copper industry and demand in the foreign exchange markets reflects a number of uncertainties about the fiscal sense in Zambia.
Ms Sayeh urged Government to pay attention and address the fiscal deficit.
â€œZambiaâ€™s growth, we think, will of course be adversely affected for 2015 as a whole as a result our current projections are for some 4.3 percent growth,â€ she said.