Question
this year's budget, titled Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable, The Hon. Minister announced an Economic Recovery Programme
this year's budget, titled "Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable", The Hon. Minister announced an Economic Recovery Programme designed to make Zambia's debt sustainable and reinvigorate growth. Government's new debt management policy includes cancelling US$1.1 billion of pipeline loans and saving US$280 million by rescoping existing projects. Zambia has also sought participation in the G20's Debt Service Suspension Initiative, which provides debt service relief until the end of the year. On the domestic front, Government plans to reduce domestic arrears, broaden participation in the Government securities market and alter its domestic debt portfolio from shorter to long-term instruments. Debt servicing is Zambia's biggest budget expenditure, accounting for almost 39.0% of the 2021 budget. Reorganising national debt therefore is necessary if Government is to free up funds to reduce poverty and improve livelihoods, and have an opportunity to seek a funding package from the International Monetary Fund ("IMF").The Hon Minister also indicated that all sectors of the economy except agriculture and Information and Communication Technologies ("ICT") are expected to register negative growth in 2020, Zambia Government ("Government") revenue will fall 12% this year, pushing the fiscal deficit to 11.7% of GDP against a target of 5.5%On the 18th November 2020, the Bank of Zambia released its quarterly Monetary Policy Committee report press statement in which they maintained the policy rate at 8 percent. On the other side, inflation rate remains higher than 15 percent.Required: In light of the above information answer the following questions:Will Zambia meet its Gross Domestic Product target of 1.8 percent in 2021? Justify your answer. (15 Marks)Is the Inflation rate target of 6-8 percent attainable in 2021? (15 Marks) [30 Marks]
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