Zambia sees growth above target

LUSAKA – Zambia expects its 2007 economic growth rate to rise above a six per cent target, but slow government capital investment could undermine its efforts, Finance Minister Ng’andu Magande said.

“If the budget moves as it is, and we are heading perhaps for some 90 per cent in terms of budget releases, if that money is used, we could get over six per cent (growth),” Magande told Reuters in a weekend interview. He expected plans to sweeten conditions for foreign mining companies would help to boost growth in one of southern Africa’s most successful economies.Magande was not optimistic about meeting an inflation goal of five per cent, citing excess liquidity in the market, but he believes the rate could be contained under 10 per cent.”I am sorry to say I doubt it.I think five per cent was a bit too ambitious,” Magande said.”Below 10 per cent will perhaps be achievable.”Annual inflation was 8,2 per cent in 2006.Magande said a surplus of white maize supplies would lower food prices and help efforts to tame inflation.Western donors have praised Zambia’s economic performance.Inflation fell into single-digits in April 2006 for the first time in three decades and sustained economic growth has averaged five per cent in the last six years.Magande said Zambia would struggle to limit excess liquidity in the economy because funds released for capital expenditure were still held by commercial banks, including those designated for construction and road repair.”I am not quite sure we will be able to do that (limit liquidity),” Magande said.”For example, expenditure on the capital, it’s really slow up to now.So with that kind of slow implementation of the budget, I am now beginning to think this money will still end up in the accounts and it’s not going out,” he added.Zambia will defer payments on 30 per cent customs duties on imported mining equipment for up to one year in a bid to boost foreign investment in the industry, said Magande.This would give companies a chance to get operations going smoothly and gain profits before paying taxes.”I can’t tax somebody who is not making profits,” said Magande, whose management skills are credited with strengthening Zambia’s economy.Taxes have been a controversial issue in Zambia since last September’s presidential and legislative elections.Chief opposition leader Michael Sata swept to a major victory in the parliamentary polls, following a promise to raise taxes paid by mines.Nampa-ReutersHe expected plans to sweeten conditions for foreign mining companies would help to boost growth in one of southern Africa’s most successful economies.Magande was not optimistic about meeting an inflation goal of five per cent, citing excess liquidity in the market, but he believes the rate could be contained under 10 per cent.”I am sorry to say I doubt it.I think five per cent was a bit too ambitious,” Magande said.”Below 10 per cent will perhaps be achievable.”Annual inflation was 8,2 per cent in 2006.Magande said a surplus of white maize supplies would lower food prices and help efforts to tame inflation.Western donors have praised Zambia’s economic performance.Inflation fell into single-digits in April 2006 for the first time in three decades and sustained economic growth has averaged five per cent in the last six years.Magande said Zambia would struggle to limit excess liquidity in the economy because funds released for capital expenditure were still held by commercial banks, including those designated for construction and road repair.”I am not quite sure we will be able to do that (limit liquidity),” Magande said.”For example, expenditure on the capital, it’s really slow up to now.So with that kind of slow implementation of the budget, I am now beginning to think this money will still end up in the accounts and it’s not going out,” he added.Zambia will defer payments on 30 per cent customs duties on imported mining equipment for up to one year in a bid to boost foreign investment in the industry, said Magande.This would give companies a chance to get operations going smoothly and gain profits before paying taxes.”I can’t tax somebody who is not making profits,” said Magande, whose management skills are credited with strengthening Zambia’s economy.Taxes have been a controversial issue in Zambia since last September’s presidential and legislative elections.Chief opposition leader Michael Sata swept to a major victory in the parliamentary polls, following a promise to raise taxes paid by mines.Nampa-Reuters