FELIX NKINKE, Lusaka
‘WE must first understand that rebasing the economy is not a policy decision, it is an eventuality… it has to be done. This varies from country to country but the standard is that every five years the economy must be rebased.”
These were the remarks by Professor Oliver Saasa, one of the country’s renowned economists and business experts commenting on a recent disclosure by Vice-President Inonge Wina that Zambia’s gross domestic product (GDP) would be rebased this year.
In 2019, Minister of Finance Bwalya Ng’andu told Parliament that plans had been put in motion to rebase the economy, but due to resource constraints, the exercise was not effected.
Rebasing the GDP has become a growing trend among African countries in recent years.
The process, which provides a clearer picture of an economy’s size and structure, has implications for a wide array of economic stakeholders and critics as well.
According to the Ministry of Finance data, Zambia last rebased the GDP in 2010, and over time, that year’s base figures have been used as parameters to evaluate the country’s fiscal position and potential revenue bases while providing investors with more accurate information on which to base their investment decisions.
Prof Saasa highlights that to rebase the economy is vital for any country.
“The whole idea is essential and multifold. Firstly, the assumption you make about the size of your economy is based on that base year when you did the last calculation. It gives an idea of how much size the economy is,” he says.
For instance, he explains that Zambia’s GDP rebasing was done in 2010 and since then the country has been talking about the same GDP over the years and essentially it would mean as if the economy has been static, and yet it has been growing.
“Since our last rebasing, a lot of new activities have emerged such that even if you make an assumption that the old sectors in the economy had remained more or less moving with the same parameters within the same range and therefore you can easily predict, but there are new players that have emerged in the economy,” Prof Saasa said.
Centre for Trade and Policy Development (CTPD) Zambia tax platform coordinator Ibrahim Kamara also explained that it is useful to rebase the GDP as it is widely used as an indicator of economic performance.
Mr Kamara points out that while in real terms rebasing of GDP does not change the value of any economic output, it provides a reference in which future prices are compared at constant prices.
“The rebasing is an exercise carried out in a bid to account for changes that have occurred in an economy over time. The rebasing will also provide government information on the size and the composition of CLICK TO READ MORE
FELIX NKINKE, Lusaka