1 January 2013

Zambia: Fiscal Prudence Key to Economic Growth - BAZ

MAINTAINING fiscal prudence amid increasing pressure to redistribute wealth and fighting high youth unemployment will be cardinal in sustaining the country's impressive macro-economic performance this year, the Bankers Association of Zambia (BAZ) has said.

Giving an economic outlook for 2013, BAZ chairperson Friday Ndhlovu said it remains to be seen whether the current performance would be sustained as pressure from the opposition and the youth was expected to rise.

Generally, he said, the economic outlook for 2013 was bright despite some negative aspects like the high mealie meal prices and the invasion of the maize fields by the Army worms.

"We are optimistic that the Zambian economy will continue on a growth trajectory in 2013," Mr Ndhlovu said.

The recent mealie meal price increases amid the maize bumper harvest for 2010-12 also present inflationary pressure.

Further, the recent Army worm attacks on maize fields countrywide may threaten the country's 2013 maize production.

However, the decision by the Government to ban maize exports may moderate mealie meal prices and could significantly moderate the effect on inflation from other economic sectors.

"We expect the exchange rate to remain stable. If the low interest rates on treasury bills and Government bonds are sustained, the low level of interest rates on Government securities should moderate the banks' lending rates coupled with the recently announced lending rate cap set by the Bank of Zambia.

He said in the 2013 national Budget, the Government increased the withholding tax rate on payments to non-residents for management or consultancy fees and royalties to 20 per cent from the current 15 per cent and the proposed changes may have a significant impact on commercial banks' operations.

And the BAZ has secured K755 million for the implementation of the Citizens Economic Empowerment (CEE) financial sector codes.

BAZ chairperson Friday Ndhlovu said as the financial sector leaders, the association collected an additional K54 million from the subsectors, bringing the total figure to K755 million for the implementation of the CEE financial sector codes.

"As financial sector leaders, BAZ collected an additional K54 million from subsectors, bringing the total to K755 million funds required to fund the technical working group's activities, Mr Ndhlovu said.

He said there had been a delay in executing a number of activities due to circumstances beyond BAZ's control.

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