By BUUMBA CHIMBULU
ZAMBIA’S budget deficit which has widened substantially is expected to gradually narrow as Covid-19 recedes, the World Bank has predicted.
Former Finance Minister, Bwalya Ng’andu, last year indicated that Zambia’s fiscal deficit would rise to 11.7 percent of Gross Domestic Product.
Dr Ng’andu however mentioned that Government would aim to bring this back down to 9.3 percent this year.
Budget deficits which have widened substantially in countries such as Zambia, Chad and Ethiopia are expected to gradually narrow as Covid-19 recedes, the World Bank said in its Global Economic Prospects for June, 2021.
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“A stronger than expected rally in metals and oil prices could boost exports, increase government revenues, and ease fiscal pressures in industrial commodity exporters.
“As Covid-19 recedes, budget deficits, which have widened substantially, are expected to gradually narrow (Chad, Ethiopia, Zambia; IMF 2020),” it indicated.
According to the World Bank, for many industrial commodity-exporting economies, higher oil and metal prices would boost export revenues.
It however quickly mentioned that this would not be sufficient to close fiscal deficits opened by last year’s shortfalls.
According to the Bank, the pace of vaccinations could surpass expectations, for example, if the COVAX facility and bilateral partners assist Sub-Saharan Africa (SSA) countries in scaling up their vaccination programmes.
This, it explained, could restore consumer and business confidence, stimulate consumption and investment, lower unemployment, and strengthen the recovery.
The World Bank noted that fiscal pressures and increased policy uncertainty due to Covid-19 were expected to hamper the recovery by delaying critical investments to revamp aging oil fields and increase production capacity in the oil sector.
The institution also expressed concern that the Covid-19 pandemic had contributed to a widening of budget deficits and a sharp increase in government debt in the region.
It feared that high debt burden and fiscal pressures could become more acute and precipitate financial distress in some countries, especially if borrowing costs increased sharply in line with further possible increases in long-term yields on government bonds.
It also indicated that a sudden rise in sovereign borrowing costs could exacerbate fiscal pressures in some countries.
“Despite still-benign global financial conditions, sovereign borrowing costs have remained higher than before the pandemic in some countries (Angola, Ghana, Nigeria, South Africa),” stated the Bank.
The debt to Gross Domestic Product ratio in the region jumped on average eight percentage points to 70 percent of GDP last year, raising the risk of debt distress in some countries (IMF 2020).
