It has been some time since the Honorable Ministry of Finance meet the press, business community and cooperating partners to give an update on the economic outlook of Zambia. The wait is finally over, according to Chileshe Kandeka, Ministry of Finance’s Chief Spokesperson in a Whatsapp message to the Founder of Financial Insight on 10th February 2020.
With accelerating inflation and a wayward exchange rate that has found a new equilibrium in the ‘14-somethings’, economists will be listening with the intent to the fiscal voice of Dr. Ngandu.
Based on his Statement on ‘Motion to Supply’ for the 2020 Budget made to parliament and published on the Ministry of Finance website, the Minister did indicate that “to be able to stimulate economic activity, the budget proposed a number of measures to help individuals, small businesses and corporates gain access to this much-needed liquidity”.
According to the Minister, the following were some of these measures proposed:
- Zero-rating capital equipment and machinery for the mining sector and zero-rating VAT on copper cathodes sold locally so that mining companies and companies involved in copper processing are not subjected to liquidity constraints induced by delays associated with the VAT refund system and which adversely affects corporate cash flows and subsequently production;
- Substantially increasing the allocation of resources directed at dismantling arrears in order to unlock liquidity among small scale contractors and various suppliers of goods and services to government.
- Increasing the use of local contractors through the enforcement of the requirement to allocate at least 20% of works being done under any major project in order to put more money in the hands of Zambians who in turn will use it to lubricate the economy through their spending.
Stakeholders will listen with intent on 12th February 2020 what progress has been made in the aforementioned. This will be on the same day that Government’s investment wing, IDC will be hosting the ZAFICCO listing. This is a key milestone for the Minister of Finance as it was his predecessors who made the announcement the coming IPO which was indicative of the Government seeking out capital markets to raise finance for expansionary agendas.
Conversely, stakeholders will also be listening intently on how draught and energy poverty will impact the 2020 financial outlook. At the moment, food inflation is now over 15.2% as at January 2020 caused by the draught of 2019. The cost of food production has also accelerated with the energy deficit weighing heavily.