Zambia has done everything it had been asked to by the Bretton Woods institutions but the goalposts have been moved again and vital donor support is still not forthcoming.
The Zambian economy has been undergoing marked recession in nearly all sectors, with several indicators pointing in the direction of negative Gross Domestic Product (GDP) growth. Inflation is on the rise, and so are the exchange and interest rates, contrary to budgetary projections made early last year.
Minister of Finance and Economic Development, Edith Nawakwi, in recent months, has had to admit that things do not look very bright. Ms Nawakwi said the country will most likely record a negative growth rate in GDP for 1998. Addressing the 1999 Permanent Secretaries Budget workshop in Lusaka, the Zambian capital, Ms Nawakwi said, "I am not optimistic about GDP going up. We have had to deplete our foreign exchange reserves in order to remain current on debt service obligations."
Difficult year ahead
She said 1999 is likely to very difficult year for Zambia, because of dwindling foreign reserves, rising interest rates, inflation, and the falling value of the kwacha, the local currency. The Central Statistics Office director, David Diangamo, said the monthly inflation rate for October stood at 27.6%. In September the figure was 27.5%. It was expected to rise to between 28 and 29% by the end of the year making nonsense of the government's inflation rate target for the end of 1998 of 15%.
The situation is compounded by the fact that donors refused to release $530m in balance of payment support pledged at the last World Bank Consultative Group meeting in Paris, France in May last year, until all Zambia Consolidated Copper Mines (ZCCM) are completely in private hands. With the sale of Nkana, Nchanga and Konkola Meebelo mines to Anglo American, it is expected that the donors will now relent.
Despite the freeze on aid. last year, the Zambian government is up-to-date in its debt-servicing obligations. According to the Ministry of Finance and Economic Development, the Zambian government 'has managed to remain current with its debt servicing obligations, principally through the use of foreign reserves.'
The Ministry of Finance report says, '$32.7m was paid during the third quarter bringing the total for the year to date to $103.61m.' Because of this, the report says, 'gross official reserves have fallen to $114m at the end of the third quarter, down 52% from the position at the...