The year 2017 was a moderately good year for Zambian Economy and ending with signs of the turnaround which must be used once again to reset the economy on a trajectory of good growth. The country's economy has continued to show resilience in the first quarter of 2018 with a positive economic outlook and growth rate posed at five percent and inflation in the range of six to eight percent in 2018. This has been driven by the increased activity in the manufacturing, Construction, financial and mining sectors. However, critical decisions must be made and actions implemented promptly to steer the country on a path of sustainable development and inclusive economic growth.
Global financial market movements over the last month have been heavily influenced by central bank announcements in Europe, Japan and the United States. While global monetary policy remains accommodative at the margin, the lack of additional monetary stimulus by the ECB and an implicit reduction in Japanese policy easing resulted in the financial backdrop for emerging markets becoming slightly less favourable over the last few weeks. Market nervousness has also been compounded by a growing sense that monetary policy is approaching its limits.
For Zambia, there is nascent evidence that the business cycle has passed its worst phase. The relatively being global macroeconomic and market backdrop, in addition to continued signs of domestic economic rebalancing, a perceived decline in local political risk and a related increase in the likelihood of structural reform, even if limited, has seen Zambia's currency and debt markets appreciating in value. The increased activity in the manufacturing, financial and mining sectors has contributed positively to the economy. The copper prices are stable on the international market and FDI has also increased.
The announcement from Bank of Zambia on the 20th Februarys MPC meeting that the central bank has reduced the policy rate to 9.75 percent and statutory reserve ratio to 5 percent effectively. This will help to compel financial institutions to reduce lending rates and this will help to stimulate access to credit to productive sectors of the economy and promote economic diversification and growth.
The key macroeconomic objectives for 2018 amongst other things include GDP growth of five percent; inflation of between six and eight percent; import cover of three months and limiting the fiscal deficit on a cash basis to 6.1 percent. However, the objective to reduce the fiscal deficit on a cash basis only, as opposed to an accruals basis is of concern.
With the new Finance Minister in the picture we hope government will adhere to its budget plans and the ESGP to restoring credibility of the budget by minimizing unplanned expenditures and halting the accumulation of arrears; enhancing domestic resource mobilization and refocusing of public spending on core public sector mandates; Improving Zambia's economic and fiscal governance by raising the levels of accountability and transparency in the allocation and use of public finances; Ensuring greater economic stability, growth and job creation through policy consistency to raise confidence for sustained private sector investment; and Scaling-up Government's social protection program to shield the most vulnerable in our society.
Finally, the expected stability in inflation, by increasing real income growth will contribute towards a pick-up in growth in 2019 and 2020. However, critical decisions must be made and actions implemented promptly to steer the country on a path of sustainable development and inclusive economic growth.
Whether these measures deliver the desired outcomes will depend on the Government's willingness, and ability, to make tough choices.
God bless this great country Zambia and its leadership.
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