Cabinet has deliberated on the growth prospects and the need to restore the Gross Domestic Product (GDP) on an upward trajectory in 2019 and over the medium term.
Minister of Finance and National Planning Margaret Mwanakatwe told journalists in Lusaka that cabinet took recognition of the domestic and external factors that have negatively impacted on growth as well as the domestic front. .
She said cabinet also noted the negative impacts that climate change has had on agriculture and electricity production.
“There is need to urgently complete energy reforms and renegotiate unsustainable power purchase agreements so that the sector does not become a contingent liability on the fiscal and to ensure continued investments in the sector to overcome the energy deficit over the medium term,”she said.
Mrs Mwanakatwe said cabinet also resolved to address liquidity challenges by dismantling domestic arrears and halting the accumulation of new ones as well as designating the Ministry of Development and National Planning as a focal point to lead in the implementation of the diversification agenda for better accountability.
She said cabinet agreed on the need to reduce the fiscal deficit to sustainable levels and noted the impact of the increase in debt service payments on the budget and the necessity to reduce expenditure.
Mrs. Mwanakatwe further revealed that cabinet gave other directives which included legal reforms such as the enactment of a new Public Procurement law to be hastened to ensure value for money.
She also added that to this effect, the treasury was directed to issue strict guidelines on the matter and ensure that the measures put in place are implemented expeditiously to facilitate the sourcing of external funds to finance critical expenditures in the 2019 budget that are required to support growth.
“Cabinet also deliberated on the need to take measures to bring the risk on debt from high to moderate risk of debt distress and the impact this was having on the macroeconomic position through adverse sentiments…cabinet also deliberated on the tight liquidity conditions in the market and increasing lending rates,” she said.
The minister said that cabinet had decided to indefinitely postpone the contraction of all new non-concessional loans in the intervening period, to cancel some signed but undisbursed loans, Increase the control and managements on foreign financed loans and reduce the deficit to induce lending to the private sector.
She said to this effect, the Ministry of Finance was directed to present to cabinet, a list of loans to be considered for cancellation, postponement and slowdown for consideration.
Reacting to the Exchange Rate Developments, the Finance Minister disclosed that cabinet deliberated on the factors affecting the volatility of the exchange rate that included high and lumpy demands for foreign exchange in the market, strengthening of the US Dollar and sentiments emanating from concerns on the macroeconomic developments.
Mrs. Mwanakatwe emphasized that cabinet took note of delays in implementing some of the previously taken decisions and directed that all ministers will now be allocated tasks and associated timelines to ensure effective implementation.
This was contained in a press statement made available to Lusaka Star by the Permanent Secretary of the Ministry of Finance Chileshe Kandeta on May 29, 2019.