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Zambia unveils 4.5 billion USD 2016 national budget

LUSAKA, (Xinhua) -- Zambia’s Finance Minister Alexander Chikwanda unveiled on Friday the 2016 budget with the declaration that the year will witness further challenges to government’s efforts to raise the economy to higher heights in order to reduce poverty.

Announcing the 53.14 billion Zambian kwacha (about 4.5 billion U.S. dollars) budget in parliament, the Zambian minister said the southern African nation should be prepared to meet the challenges that may arise from externally-induced shocks, especially further falls in commodity prices and their knock-on effects on the economy.

The Zambian economy has come under extreme pressure this year due to falling copper prices and power shortages caused by reduced waters in its reservoirs, resulting in the local currency depreciating significantly and fueling skyrocketing of prices of products and services while mining firms have threatened to cut down production and retrench thousands of workers.

He said the expenditure for next year represents 25.8 percent of Gross Domestic Product (GDP), with 42.11 billion Kwacha of the budget expected to be raised through domestic revenues while grants from cooperating partners will represent 550 million kwacha.

The government intends to spend 36.1 percent of the budget on general public services which includes allocation of funds to a sinking fund to for repayment of three Eurobonds the government has acquired , cost related to the general elections, among others.

The Zambian minister admitted that the adverse global economic environment experienced this year has negatively affected the country’s economic growth which has now been revised from 7.0 percent to 4.6 percent.

The revision of the economic growth target is due to weaker global economic activity, especially in China and the Eurozone which has dampened demand for commodities and lowered mining sector output, he added.

“The poor rains last season also led to an unfavorable performance of the agriculture sector. Further, electricity supply constraints in the second half of this year, will affect output across all sectors of the economy,” he said.

On macroeconomic objectives, the government intends to achieve real GDP growth rate of 5.0 percent, increase domestic revenue mobilization to at least 20.4 percent of GDP from 18.1 percent projected in 2015, reduce budget deficit to 3.8 percent of GDP from 6.9 percent in 2015 and limit domestic borrowing to 1.2 percent of GDP.

Other macroeconomic objectives include maintaining a single digit inflation with an end-year target of no more than 7.7 percent, accelerate diversification of the economy, maintain international reserves at no less than 4 months of import cover and creation of employment opportunities through accelerated implementation of programs such the country’s Industrialization and Job Creation Strategy and the Youth Empowerment Action Plan.  

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