Thursday, September 05, 2013

By-elections budgeted for - Chikwanda
By Kabanda Chulu
Mon 12 Aug. 2013, 14:01 CAT

FINANCE Minister Alexander Chikwanda says there is no modicum of budget overrun due to by-elections and that the gaps in the budget are genuine economic gaps. And Chikwanda says the by-elections being conducted countrywide have not caused any upheaval in the economy because they were budgeted for under contingency funds.

Chikwanda also says that macroeconomic objectives, including GDP growth rate projected at above seven per cent, might come down to six per cent due to the externally induced shocks that are causing some challenges in the country.

During an interaction with the media in Lusaka yesterday, Chikwanda, who led a high-powered team of senior government officials, representatives from Zambia Revenue Authority and Bank of Zambia, said Zambia could not be insulated from what was happening in the world.

"There is very little growth rates in the global economy. In the US, the economy is growing at two per cent, in Europe it is worse and for the past decade, it is the emerging economies like China and other members of the BRICS Brazil, India, China and South Africa that have hugely accounted for the global economic growth," Chikwanda said.

"Troubles in the big economies of Europe reverberate in other parts of the world, including Zambia, so deficits are a normal part of lifeā€¦there has not been a single year when there has not been deficits in this country but we have the ability to manage these issues since the gaps in the budget are a management factor and not fundamental... it is how you balance up."

He said there was nothing the government could do if unfavourable economic factors were externally induced.

"We resort to borrowing locally and internationally but we keep borrowing within limit to avoid getting back into indebtedness and we also avoid crowding out the private sector, which is a critical component in job creation, so currently, borrowing is at five per cent of GDP," Chikwanda said.

"I am very constrained to comment on statements made by former finance ministers since we can dialogue but Edith Nawakwi's views are neither here nor there because there are certain things that prop up but there will be no overrun; just gaps in the budget which are easily manageable, especially with the removal of subsidies."

On Friday, Nawakwi said Zambia risked being in K5 billion deficits due to unbudgeted for expenditure.

In his budget speech last year, Chikwanda said under macroeconomic objectives, policies and strategies for 2013 and the medium term, the government was targeting to achieve real GDP growth of above seven per cent, attain end year inflation of not more than six per cent, achieve domestic revenue of at least 20 per cent of GDP, limit the overall fiscal deficit to 4.3 per cent of GDP of which domestic borrowing will be 1.5 per cent, maintain gross international reserves of at least four months of import cover and creation of at least 200,000 decent jobs.

However, borrowing stands at five per cent, inflation is at 7.3 per cent and GDP might come down to six per cent.

But Chikwanda said the targets would be near projected figures because the global economy may rebound towards the end of year.

"Inflation has moved upwards but this is not a worrying scenario; we are performing and we are going to deliver and move the nation forward," he said.

Chikwanda, who avoided to explain how much the five per cent borrowing could be in monetary terms and if a bloated Cabinet and by-elections were major contributors, said the government was watching its national debt profile.

"We are critically watching our expenditure patterns because we don't want to get back into debt. By-elections have not contributed to budget gaps; they were covered for under contingency funds," said Chikwanda.

"By-elections have not caused any economic upheaval. There is not even a modicum of overrun due to by-election, but the gaps in the budget are genuine economic gaps and there is no way Ministry of Finance can spend finances without parliamentary approval or using underhand methods."

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