Zambia sees wider 2022 budget deficit, slow GDP growth

09/30/2022 | 11:54am

LUSAKA (Reuters) -Zambia will have a wider budget deficit this year than previously projected while economic growth is seen slowing compared to last year, Finance Minister Situmbeko Musokotwane said on Friday.

Presenting the 2023 budget, Musokotwane said the 2022 budget deficit is projected at 9.8% of GDP, wider than an estimated deficit of 6.7% seen in October last year.

The deficit is forecast to be no more than 7.7% of GDP in 2023, up from an earlier target of no more than 6.3% seen in February.

Economic growth was projected at 3% in 2022, with a 2023 growth target of 4%. Last year, the economy grew 4.6%.

Zambia in November 2020 became the first country in Africa to default on its sovereign debt during the COVID-19 pandemic. According to the International Monetary Fund, the copper-rich country is seeking $8.4 billion of debt relief from 2022 to 2025.

"We appeal to our creditors to support us so that together we can quickly attain debt restructuring," Musokotwane said.

Zambia's external public debt reached $14.87 billion at the end of June 2022, he said. Zambia's creditors include Chinese lenders and bondholders.

The government said in March that external debt was $17.27 billion at the end of 2021. In July, it cancelled $2 billion of undisbursed loans.

The IMF in late August approved a $1.3 billion, three-year loan to Zambia, a crucial step in the southern African country's quest to restructure its debts. The IMF says the country had a 133% debt-to-GDP ratio at the end of 2021.

Musokotwane said that the government had secured $300 million on concessional terms from the World Bank to promote commercial farming.

He also said the government would increase participation in the mining sector by acquiring "golden shares" and that it had made headway in resolving problems at Konkola and Mopani copper mines, where it is seeking new investors.

To attract investment and ensure increased production, Musokotwane said the government planned to restructure the mineral royalty tax with regard to copper.

Zambia gets 70% of its export earnings from mining and has pledged to review its mining tax policy and increase exploration to boost and diversify production.

(Reporting by Chris Mfula in Lusaka and Bhargav Acharya in BengaluruWriting by Olivia Kumwenda-Mtambo and Rachel SavageEditing by Catherine Evans and Frances Kerry)

By Chris Mfula and Bhargav Acharya

Reuters 2022
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