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2016 Budget

2016 BUDGET ADDRESS BY HON. ALEXANDER B. CHIKWANDA M.P, MINISTER OF FINANCE DELIVERED TO THE NATIONAL ASSEMBLY ON FRIDAY, 9TH OCTOBER, 2015 

1. Mr. Speaker, I beg to move that the House do now resolve into Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January, 2016 to 31st December, 2016, 

presented to the National Assembly in October, 2015. 

2. Sir, I am the bearer of a message from His Excellency the President, recommending favourable consideration of the motion that I now lay on the Table.
 
3. Mr. Speaker, shortly after I presented the 2015 Budget to this august House, the nation lost the Republican President, His Excellency, Mr. Michael Chilufya Sata on 28th October, 2014. 

He was a leader who tenaciously fought for the well-being of all Zambians and will forever hold a place of honour and distinction in the hearts of our people. We will do well to perpetuate 

his vision of making Zambia a better place for all. 

4. Sir, the loss of our President was a devastating blow to us all, but, as a nation, we showed our political maturity in the way we responded to our loss. On 20th January, 2015 we 

peacefully elected a new President, His Excellency, Mr. Edgar Chagwa Lungu, who has fittingly taken over the mantle of leadership and who, like his predecessor, is also driven by a 

passionate commitment to uplift the lives of all Zambians. 

5. Mr. Speaker, the year 2015 has been economically challenging. The slowdown in the Eurozone and in the Chinese economy has lowered the demand for, and the price of copper. With 

copper being the main source of our foreign exchange earnings, the fall in price has put pressure on the value of the Kwacha and lowered our tax receipts from the mining sector. Further, 

climate change has become a reality and is affecting our day-to-day lives. It affected the timing, distribution and amounts of rainfall last season that adversely affected our agricultural 

sector and weakened our capacity to generate sufficient electric power. 

6. Sir, with the development of a strong El Nino, a weather pattern which generally results in lower rains in Southern Africa, and continued economic restructuring in China, these 

challenges are expected to remain with us as we enter 2016. Indeed, new challenges are anticipated, such as higher interest rates on dollar denominated loans as the United States Federal 

Reserve Bank System ends its cheap money programme known as quantitative easing. 

7. Mr. Speaker, I want to assure the nation, through this august House, that the Patriotic Front Government is fully committed and resolved to meet these challenges. Over the last four 

years, we have built a firm foundation to sustain broad based and inclusive growth, diversify and deepen the resilience of our economy and further entrench social justice so that all 

Zambians, of every age and gender, and from all parts of Zambia, benefit from the nation’s development path. 

8. Sir, Government remains grateful to all citizens, institutions and organisations who patriotically responded to the call to submit proposals for the 2016 Budget. These valuable 

contributions made it possible to formulate the 2016 Budget in a manner that balances the requirement to consolidate our fiscal position with the need to sustain economic progress and 

raise the living standards of all Zambians. 

9. Mr. Speaker, it is evident that the expansionary fiscal stance of the past four years will need to be moderated in the current global economic environment. It is in this context that the 

theme of the 2016 Budget is “Fiscal Consolidation to Safeguard Our Past Achievements and Secure a Prosperous Future for All”. 

10. Sir, my address this afternoon is in four parts. Part I gives an overview of the global developments and their impact on the domestic economy. Part II outlines Government’s response to 

these developments and sets out the macroeconomic policies, targets, sectoral objectives and strategies for 2016, aimed at sustaining socio-economic progress while ensuring that 

Government follows a fiscally prudent path. The details of the 2016 Budget are presented in Part III and finally, I conclude my address in Part IV. PART I GLOBAL AND DOMESTIC 

ECONOMIC DEVELOPMENTS IN 2015 

11. Mr. Speaker, I present the Budget at a time when global economic growth is sluggish, with output growing at an estimated 3.1 percent in 2015 compared to 3.4 percent in 2014. In the 

United States of America, the economy is expected to grow by 2.6 percent this year, while the outlook in the Eurozone remains weak at 1.5 percent. In emerging market and developing 

economies, growth of 4.0 percent is expected. China's growth is expected to slow to around 6.8 percent this year, presenting a major impediment to growth prospects for commodity 

dependent economies including Zambia, due to a significant decline in commodity prices.

 12. Sir, commodity prices in 2015 have registered the largest decline since the economic and financial crisis of 2008. Copper prices are estimated to have fallen from an average of US 

$6,829 per metric tonne in 2014 to US $5,160 per metric tonne in 2015. This outturn poses serious challenges to our growth prospects, with some mining houses reconsidering the scale of 

their operations and investments in light of these adverse developments.
 
13. Mr. Speaker, given the adverse global economic environment, Zambia’s growth in 2015 is projected to be much lower than the 7.0 percent that I announced to this august House in 

October 2014. I now project growth to be 4.6 percent. This is due to weaker global economic activity, especially in China and the Eurozone, which has dampened demand for commodities 

and lowered mining sector output. The poor rains last season also led to an unfavourable performance of the agriculture sector. Further, electricity supply constraints in the second half of 

this year, will affect output across all sectors of the economy. 

14. Sir, budget implementation in 2015 continues to face a number of challenges. These include the fall in copper prices, the depreciation of the Kwacha, higher interest payments and the 

need to clear arrears for fuel and crop purchases. It is on account of these challenges that the 2015 Budget deficit is expected to widen to 6.9 percent of GDP from the projected 4.6 percent 

of GDP. 

15. Mr. Speaker, the annual inflation rate declined to 7.7 percent in September, 2015 from 7.9 percent in December, 2014. The decline in inflation was mainly attributed to non-food 

inflation, which fell to 7.3 percent in September, 2015 from 8.4 percent in December, 2014 largely on account of a reduction in fuel pump prices effected in January, 2015. However, food 

inflation rose to 8.1 percent from 7.4 percent over the same period. 

16. Sir, tight monetary policy also eased inflationary pressures in 2015. However, the recent sharp depreciation in the exchange rate and the electricity deficit are exerting inflationary 

pressures that have potential to raise inflation further above the end-year target of 7.0 percent over the remainder of the year. With continued implementation of appropriate policies, I 

remain confident that inflation will be contained in single digits by end-2015. 

17. Mr. Speaker, the foreign exchange market has experienced considerable pressure in 2015 with the Kwacha depreciating against the major trading currencies due to international and 

domestic factors. International factors included the general strengthening of the US dollar, low copper prices and a noticeable reduction in foreign portfolio investment inflows. 

18. Sir, on the domestic front, relatively low net supply of foreign exchange on the market, uncertainty over the performance of the mining sector and the widening fiscal deficit contributed 

to the weakening of the Kwacha. Further, the reduction in electricity supply, has had a negative impact on production and exports which has also contributed to the adverse performance 

of the Kwacha. 

19. Mr. Speaker, to moderate the impact of these factors the Bank of Zambia sold foreign exchange to the market and tightened monetary policy through an upward adjustment in the 

statutory reserve ratio and use of open market operations. In the long term, stabilising the exchange rate will require continued diversification of the economy, building up of foreign 

exchange reserves and commitment to fiscal consolidation and macro-economic stability. 

20. Sir, following the recovery in the US economy, there are strong indications that the Federal Reserve Bank may raise interest rates. This has led to an outflow of capital funds from the 

emerging market and developing economies. Additionally, the fall in copper prices has reduced Zambia’s foreign exchange earnings to about US $3.6 billion in the first half of 2015 from US 

$5.0 billion over the same period in 2014. 

21. Mr. Speaker, following a sharp deterioration in the trade balance over the first half of the year, the current account deficit widened to US $386 million from US $179 million recorded 

during the same period in 2014. Merchandise export earnings, at US $3.6 billion, were 28 percent lower than the US $5 billion recorded during the first half of 2014. This was as a result of 

a decline in earnings from copper, cobalt and gold, due to lower commodity prices and demand on the international market. 

22. Sir, there was also a reduction in non-traditional exports to US $0.9 billion in the first half of 2015 from US $1.1 billion over the same period in 2014. This reduction was largely on 

account of a reduction in demand for the major export commodities such as gemstones, electrical cables, cement, sulphuric acid, and fresh fruits and vegetables. 

23. Mr. Speaker, the value of imported goods at US $3.4 billion was 18.3 percent lower than the value registered during the first half of 2014. This was driven by a relatively weaker 

Kwacha and lower demand for capital goods from the mining sector. 

24. Sir, as at end-September 2015, Zambia’s gross international reserves stood at US $3.6 billion compared to US $3.1 billion recorded at end-December 2014, representing 4.4 months of 

import cover. This improvement was partly on account of inflows from the recently secured sovereign bond. 

25. Mr. Speaker, trading activity at the Lusaka Stock Exchange declined in 2015 mainly due to the strengthening of the US economy which has attracted portfolio investments out of equity 

in developing and emerging markets. Market capitalisation declined by 2.7 percent as at end-September 2015 to K64.6 billion from K66.5 billion as at end-December, 2014. Similarly, the 

All- Share index declined by 5.9 percent to 5,800.2 from 6,160.7 as at end-December, 2014 due to a general fall in share prices. 

26. Sir, Government remains committed to the growth of the local bourse to facilitate long term financing for private sector investment. To attain this, the Alternative Investment Market 

was launched in April 2015 to cater for emerging corporates that are yet to meet the listing requirements on the main window. 

27. Mr. Speaker, in order to increase opportunities for Zambian citizens to participate in economic development and to comply with listing requirements on the Lusaka Stock Exchange, 

Government commenced the process of reducing its shareholding in ZCCM-IH Plc. In this regard, 15.8 million shares, representing 36.0 percent of the available shares have since been sold 

to the National Pension Scheme Authority. The process of offloading the balance of the shares is on- going. 

28. Sir, credit to the private sector increased by 20.9 percent to K27.2 billion as at end-August 2015 from K22.5 billion as at end-December, 2014. The bulk of the loans were personal loans 

followed by credit accessed by the agriculture, manufacturing and wholesale and retail sectors. The growth in domestic credit, however, was constrained by tight monetary conditions 

necessitated by the need to contain inflation. Access to credit was also inhibited by the high interest rates, which, though stable at around 20.5 percent, continue to be prohibitive. 

29. Mr. Speaker, the performance of the financial sector during the first nine months of 2015 was satisfactory. Total assets and earnings increased, the capital adequacy position was strong 

while the overall liquidity position remained fair. In line with Government policy of financial inclusion and improving financial infrastructure, there was a significant increase in the 

number of branch and agency locations, Automated Teller Machines and Points of Sale terminals in the country. Consequently, the number of adult Zambians with access to financial 

services increased to 59 percent in 2015 from 36 percent in 2009. 

30. Sir, the stock of Government’s external debt as at end-August 2015 was US $6.3 billion. This represents an increase of 31.0 percent from US $4.8 billion as at end-December 2014. The 

increase in the external debt stock was mainly on account of the US $1.25 billion Eurobond that was issued in July, 2015 as part of the financing required for the 2015 Budget. 

31. Mr. Speaker, some of the projects that have benefited from the proceeds of the bond raised in 2015 include infrastructure development in the transport, health, education and 

agriculture sectors. Other investments are in water supply and sanitation infrastructure, the development of infrastructure in newly created districts, recapitalisation of state-owned 

enterprises and the provision of support to small and medium scale enterprises. 

32. Sir, the total external debt service for the first nine months of 2015 amounted to US $225.4 million. 

33. Mr. Speaker, preliminary data indicates that Zambia’s domestic debt as at end-September 2015 stood at K26.5 billion compared to K23.5 billion as at end- December 2014. This was 

mainly on account of an increase in the stock of Government securities. PART II MACROECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2016 

34. Mr. Speaker, for over a decade the Zambian economy has registered continuous buoyant growth. Despite this feat, unemployment and poverty have remained unacceptably high and 

the participation of Zambians in the economy has remained low. Nonetheless, we remain determined to continue on our positive growth trajectory given our resource endowment coupled 

with the resilient and entrepreneurial spirit of our people. In this regard, the focus in 2016 will be to implement programmes that will enable Zambians to participate in various economic 

activities. 

35. Mr. Speaker, His Excellency the President in his address to this august House provided a vision of where this country must be in the next 50 years. He implored us to embrace a 

transformative and smart approach in handling national matters in order to deliver smart government institutions and public services. This Budget will therefore, lay the foundation 

towards the attainment of a smart economy. 

36. Sir, the 2016 macroeconomic objectives will be to: (a) achieve an annual real GDP growth rate of 5.0 percent; (b) increase domestic revenue mobilisation to at least 20.4 percent of GDP 

from 18.1 percent of GDP projected in 2015; (c) reduce the budget deficit to 3.8 percent of GDP from 6.9 percent of GDP projected in 2015 and limit domestic borrowing to 1.2 percent of 

GDP; (d) maintain single digit inflation with an end-year target rate of no more than 7.7 percent; (e) accelerate the diversification of the economy, particularly towards tourism, energy, 

agriculture and agro processing; (f) maintain international reserves at no less than 4 months of import cover; and (g) create employment opportunities through accelerated implementation 

of programmes such as the Industrialisation and Job Creation Strategy and the Youth Empowerment Action Plan. Economic Sector Policies Agriculture .

37. Mr. Speaker, the performance of the agriculture sector during the 2014/2015 farming season was unfavourable owing to inadequate rainfall. This, once again, highlighted the challenge 

of over-reliance on rain-fed agriculture, which has been the Achilles heel in our efforts to ensure national food security. Given the reality of global warming, Government will redouble its 

efforts to expand the area under irrigation in 2016 and beyond. 

38. Sir, it is in this regard that Government will expedite implementation of activities under the Irrigation Development Support Programme to bring a further 5,000 hectares under 

irrigation in 2016. This will bring the total area under irrigation to 22,500 hectares since 2011. The areas to be covered include Lusitu in Chirundu, Mwomboshi in Chisamba and Musakashi 

in Mufulira. The increased output from the expanded area under irrigation will enhance national food security. 

39. Mr. Speaker, agricultural productivity has remained low not only due to the vagaries of the weather, but also due to over reliance on maize production, even in areas where the 

conditions are clearly not suitable for the crop. We must as a matter of urgency promote the diversification of the agricultural sector. As a demonstration of Government’s commitment to 

diversification, the electronic voucher scheme will be implemented during the 2015/2016 agricultural season in thirteen districts namely: Kalomo; Choma; Monze; Mazabuka; Chikankata; 

Pemba; Chongwe; Mumbwa; Chibombo; Kabwe; Kapiri- Mposhi; Ndola; and Chisamba. 

40. Sir, the electronic voucher scheme will give farmers a wider choice of inputs, including requirements for livestock and fisheries such as veterinary drugs, fingerlings and fish feed. 

Further, the scheme will allow farmers to source their inputs directly from agro-dealers thereby reducing the role of Government in the supply and distribution of inputs. 

41. Mr. Speaker, as I will elaborate later in my address, it is Government’s vision that the co-operative movement plays an increased and dynamic role in the economic development of our 

nation. In this context, Government anticipates that over time an increasing proportion of grain and agricultural marketing activity will be undertaken by co-operatives. 

42. Mr. Speaker, the establishment of the Ministry of Livestock and Fisheries is a demonstration of Government’s resolve to diversify the agricultural sector. In this regard, Government will 

endeavour to stimulate growth in the livestock and fisheries sub-sectors by providing the necessary technical and financial support. 

43. Sir, in order to boost productivity in the livestock sub-sector, Government will enhance the provision of extension services and disease control measures. To this effect, Government will 

intensify primary animal health care and vaccination programmes especially for cattle and chickens. Further, Government will continue producing vaccines to make these readily available 

to farmers. As a way of ensuring that small scale farmers have access to dipping facilities, Government will continue to construct and rehabilitate dip tanks across the country.

44. Mr. Speaker, Government will also continue with the construction and rehabilitation of livestock extension service centres and satellite insemination centres. Further, Government will 

establish additional breeding centres for goats and sheep in an effort to increase supply to both domestic and export markets. 

45. Sir, to achieve self-sufficiency in fish production by end-2018, Government will, in 2016, continue with the establishment of fish hatcheries in each province and encourage the 

establishment of private owned hatcheries. In addition, I would like to urge citizens to set up fish fingerling nurseries in each district while Government will provide technical support and 

set up a Fisheries Fund to provide credit to small scale fish farmers. Further, fish cage culture, especially for tilapia, will also be promoted through the creation of aqua-parks in Rufunsa, 

Kasempa, Mungwi and Chipepo. The aqua-parks are intended to provide market to local fish farmers by linking them to commercial core ventures. 

Energy 46. Mr. Speaker, Government is alive to the negative effects of the electricity deficit that the country is experiencing which has resulted in load shedding. This is not just an 

inconvenience but has real cost to the economy in terms of loss of production and, therefore, lower incomes. 

47. Sir, we have undertaken a number of measures to cushion the impact of the power shortage in the short term, such as, importation of emergency power. Although this has mitigated 

the full effect of our current situation, it comes at a cost to the fiscus and is not sustainable. 

48. Sir, the long term solution lies in promoting private sector participation in the generation of electricity. We have a number of such projects in the pipeline such as the 300 megawatts 

coal-fired thermal plant in Maamba which is near completion.

49. To encourage private sector investment in electricity generation and ensure that investors get a fair return on their investments, electricity tariffs will continue to be adjusted to make 

them cost reflective. Achieving cost reflective electricity tariffs will encourage speedy completion of private sector pipeline projects such as the 150 megawatts Kalungwishi hydro power 

station and in excess of 300 megawatts from other thermal power projects that are in the offing. 

50. Mr. Speaker, the Government has also invested in a 120 megawatts hydro power generation project at Itezhi-Tezhi and it is expected to come on stream next year. Other energy 

generating projects include the upgrading of the following: (a) Chishimba Falls mini-hydro power plant from 6 megawatts to 14.8 megawatts; (b) Musonda Falls mini-hydro power plant 

from 5 megawatts to 10 megawatts; and (c) Lusiwasi mini-hydro power plant from 12 megawatts to 101 megawatts. 

51. Sir, once all these projects come on stream, the energy sector will emerge as one of the major sources of foreign exchange. 

52. Mr. Speaker, Government’s policy in the petroleum sub-sector will be to continue with a cost reflective pricing system and ensure a stable supply of fuel to all parts of the country. This 

will be achieved by promoting private sector participation in the sub-sector. 

Tourism 53. Mr. Speaker, to promote tourism, Government will continue to develop and rehabilitate key infrastructure such as access roads to tourist sites, airports and cultural centres. 

Government has also made significant progress towards the establishment of a national airline which is scheduled to start operating in 2016. This development is expected to increase 

tourist arrivals and facilitate their in-country transportation to tourist sites. 

54. Sir, Government will further operationalise the Tourism and Hospitality Act of 2015 so as to provide for the sustainable development of the tourism industry through effective tourism 

planning, management and coordination. 

Manufacturing 55. Mr. Speaker, in line with Government’s Industrialisation and Job Creation Strategy, the growth of the manufacturing sector remains critical in our efforts to diversify the 

economy. In this regard, Government will continue to address the challenges faced by Micro, Small and Medium Enterprises such as access to finance, markets and technology, and the 

development of entrepreneurial skills. These interventions are expected to spur enterprise growth and contribute to job creation. 

56. Sir, other key interventions include the Value Chain Cluster Development Programme which is designed to promote local value addition. Under this programme, Government is 

currently supporting more than 1,800 projects in activities such as mango juice production and processing of fish, rice, dairy, cotton, honey and forestry products. These projects are being 

implemented in 42 districts countrywide thereby creating opportunities for employment and income generation especially for women and the youth. In the medium term, Government will 

expand this programme with a view to creating at least 100,000 Micro, Small and Medium Enterprise jobs predominantly in rural Zambia. 

57. Sir, Government will continue to provide targeted incentives in designated areas such as Multi-Facility Economic Zones to attract further investment and create more jobs in the 

manufacturing sector. In 2016, Government will further recapitalise the Development Bank of Zambia, National Savings and Credit Bank and empowerment agencies to enable them 

provide affordable financing to Micro, Small and Medium Enterprises. 

58. Mr. Speaker, to further support the growth of our manufacturing enterprises, the public procurement guidelines were revised to support local manufacturers. In this regard, from 1 st 

September, 2015, it became mandatory for all public sector departments to procure locally manufactured goods for all contracts which are valued at K3 million or less.

59. Mr. Speaker, access to export markets particularly for non-traditional exports is essential to economic diversification. Government will, therefore, continue to promote strategic local 

industries which have comparative advantage and secure markets for Zambian products in the region and beyond through trade blocks such as the Tripartite and Continental Free Trade 

Areas. 

60. Sir, to improve the competitiveness of our manufactured products, Government has restructured the Zambia Bureau of Standards and the Zambia Weights and Measures Agency to 

enable them effectively monitor the quality of domestically produced goods to meet international standards. 

Mining 61. Mr. Speaker, copper output for 2015 was projected at 808,000 metric tonnes. However, by end-August, 2015 copper production stood at 441,584 metric tonnes. With this 

performance, it is unlikely that the target will be met. As I have already alluded to, the major factors for this negative performance are the low copper demand and prices, coupled with 

electricity constraints. 

62. Sir, these negative developments in the mining sector threatened to cause job losses to our people. The Government’s response has been to actively engage mining companies with a view 

to finding solutions that will minimise job losses and keep the mines operational. 

63. Mr. Speaker, these developments in the mining sector are a call for action. For more than fifty years, the call for diversification has been the talk of successive Governments, but we have 

not walked the talk. What is required is for the country to take meaningful steps to diversify away from copper mining and to further exploit other minerals such as gemstones, manganese, 

diamonds and gold. I wish to urge the Industrial Development Corporation to work with ZCCM-IH Plc to exploit the opportunities of diversification within the mining sector. Transport 

Infrastructure Development 


 
 
 
 
 
 
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