Zambia Sees Budget Gap Shrinking Even as 2018 Target Missed

(Bloomberg) -- Zambia, Africa’s second-largest copper producer, plans to trim its budget deficit next year even after missing the 2018 target.

The fiscal shortfall will be 7.4 percent of gross domestic product this year compared with a previous estimate of 6.1 percent, Finance Minister Margaret Mwanakatwe said Friday in her first budget speech since she was appointed in February. In 2019 the gap will narrow to 6.5 percent, she said.

The government will spend 86.8 billion kwacha ($7.2 billion) next year, Mwanakatwe said. Zambia plans to finance more than a quarter of this externally, according to the budget document. At 24.6 billion kwacha, planned external financing is about $2 billion. The kwacha has slid 16.7 percent this month, the most among more than 140 currencies tracked by Bloomberg.

“In 2019, we are faced with higher debt obligations as past loans fall due, thereby constraining fiscal space for other expenditures,” she said.

Zambia targets economic growth of at least 4 percent for 2019, the same as this year’s projections. The World Bank earlier this month cut its forecast to 3.6 percent for next year.

With the country’s external debt standing at $9.4 billion dollars as at end June, the International Monetary Fund last year classified the country as being at high risk of external debt distress. Zambia’s total stock of government guaranteed was $1.2 billion as at end June, Mwanakatwe said.

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