Zambia freezes non-essential projects

Zambia freezes non-essential projects
ZAMBIA has frozen financing for all non-essential projects and may delay further cuts to fuel taxes to keep its budget deficit below two per cent of gross domestic product, Finance and National Planning Minister, Ng'andu Magande, said on Tuesday.

Zambia is equally feeling the squeeze from the global financial crisis, which has led to a drop in commodities prices and reduced investor interest in emerging markets in Africa and elsewhere.

Mr Magande told journalists after a signing agreement with the United Nations Development Programme in Lusaka for next week’s presidential election that government would only release funds for road construction and other infrastructure projects that were seen as critical to the development of the economy.

It simply means that for other projects, we are not going to release funds the ministries needed (and) they have to live within the budget, Mr Magande said.

Zambia had hoped to keep its deficit this year to 1.2 percent of gross domestic product (GDP), but it conceded last month that it would not reach that target.

Mr Magande said Zambians might have to wait until next year for another drop in the price of petrol.

When we cut fuel prices in June, we suffered a loss of K120 billion ($31.1 million). This is good because less tax means there will be more economic activity, but I have to find money somewhere to cover the loss, Mr Magande said.

The bad news was partly offset by the World Bank’s announcement on Monday that it would provide $75.5 million to boost electricity generation in Zambia which is facing a power crisis.

Kapil Kapoor, the World Bank’s country manager for Zambia, said 18,000 additional households would be connected to the national grid as a result of the funding. He noted, however, that Zambia would need up to $2 billion to meet growing power demand from industrial and residential customers.

Only 20 per cent of Zambia’s 12 million people have access to power and only three per cent of those are in rural areas, according to the government. It has targeted raising access to electricity to 50 per cent of the population by 2030.

Officials say Zambia has up to 1,650 megawatts of generation capacity but currently produces only 1,400 megawatts of power due to problems with aging power stations and transmission lines.

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