ZAMBIA'S balance of payment (BoP) has recorded a deficit largely on account of unfavourable performance in the current account, Bank of Zambia (BoZ) Governor Michael Gondwe has said.
Speaking during the BoZ 2013 first quarter media cocktail in Lusaka at the weekend, Dr Gondwe said the overall BoP recorded a deficit of US$440.7 million down from a surplus of US$1,026.2 million during the third quarter.
He said the unfavourable outurn in the account was largely driven by the higher increase in the import bill which stood at 5.8 per cent compared with the 3.8 per cent growth in merchandise export earnings.
Constituting the higher import bills were petroleum products, iron and steel, chemicals, motor vehicles and food items.
However, the country's general economic prospects for the first half of 2013 remains favourable, underpinned by expected good domestic performance driven by agriculture manufacturing and construction sectors.
"In this regard, Gross Domestic Product (GDP) was expected to be in line with projected annual growth rate of 7 per cent," Dr Gondwe said.
With regard to export earnings, Dr Gondwe said much of the growth was explained by the 20.6 per cent rise in non traditional exports (NTEs) to US$647.9 million due to higher earnings from copper wire, cane sugar, burley tobacco, cotton lint and cotton yarn.
He said Zambia's export earner, copper, posted a marginal increase of 0.2 per cent to US$1,833.0 million during the quarter under review, which was driven by a 3.2 per cent rise in export volumes as the average realised price of the metal, fell by 2.9 per cent to US$6.922.21 per tonne.
With the expected recovery in the global economy, the Zambian external sector was projected to improve supported by continued growth of NTEs.
On the foreign exchange market, Dr Gondwe said the market was characterised by higher demand for foreign exchange compared with the third quarter of 2012.
This he said, was reflected in a total of K683.5 billion being spent by the public to purchase foreign exchange from commercial banks compared with net sales of K1, 223.6 billion in the third quarter.
He said the higher demand was largely driven by increased net purchases of the Rand to a tune of ZAR2, 280.6 million (K1, 358.8 billion) from ZAR1, 876.6 (K1, 116.0 billion) over the same period.
Dr Gondwe said that BoZ will provide market support during the period through sales and purchases of foreign exchange in line with the objective of maintaining stability in the foreign exchange market.
He said despite the market support provided by BoZ, demand for foreign exchange remained high relative to supply and coupled with other developments in the foreign exchange market, the Kwacha depreciated against all major traded currencies.
"The local currency lost by 5.3 per cent and 7.0 per cent against the United States dollar and pound sterling, to close at averages of K5,192.20/US$ and K8,338.76/pound respectively.
Similarly the the Kwacha depreciated by 9.3 and 0.1 per cent against the Euro and Rand respectively, ending at an average of K6, 739.79/ and K597.11/ZAR, respectively," he said.
The Kwacha continued to depreciate against the US dollar, losing by 5.04 per cent to close at ZMW5.4041 (K5, 404.7/US$), on account of sustained higher demand.