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 - 1 -
B
UDGET
A
DDRESS BY
H
ONOURABLE
D
R
.
 
S
ITUMBEKO
M
USOKOTWANE
,
 
MP,M
INISTER OF
F
INANCE AND
N
ATIONAL
P
LANNING
 D
ELIVERED TO THE
N
ATIONAL
A
SSEMBLY ON
F
RIDAY
,
 
30
TH
 
J
ANUARY
,
 
2009
1.
 
Mr. Speaker, I beg to move thatthe House do now resolve into Committeeof Supply on the Estimates of Revenueand Expenditure for the year 1
st
January2009 to 31
st
December 2009 presented tothe National Assembly in January
 
2009.2.
 
Sir, I am the bearer of a messagefrom His Excellency the Presidentrecommending favourable considerationof the motion that I now lay on the Table.3.
 
Mr. Speaker, as I begin this budgetspeech, I wish to acknowledge themacroeconomic achievements thatZambia attained when the economy wasunder the stewardship of my predecessor,Honourable Ng’andu Magande, MP. Iwould also like to pay tribute to the lateHonourable Emmanuel Kasonde, whotwice served as Minister of Finance, andlaid the foundation for the liberalisation of the Zambian economy.4.
 
Mr. Speaker, I present this budgetat a time of great uncertainty in the worldeconomy. The global economy is undersevere strain, with recession in severaladvanced economies, and significantlyslower growth in emerging countries.Recent developments in the mining sectorhave demonstrated that Zambia is alsovulnerable to this crisis. These eventshave had a significant influence on ourthinking, and therefore the preparation of this year’s budget.5.
 
Sir, despite these unprecedentedchallenges, my vision is that of aprosperous Zambia. I see a vibrant anddiversified economy where hard work andthe spirit of entrepreneurship arerewarded. This economy will be one thatprovides ample opportunity for everycitizen to realize their potential and fullyprovide for their families. I see all ourcitizens, in all corners of our country,waking up each morning well nourished,in decent housing, with access to cleanwater and sanitation. I see our citizenshaving paved roads that do not flood eachrainy season, reliable and renewableenergy, and high quality health andeducation services that are within easyreach.6.
 
Mr. Speaker, this is the vision of Zambia that I have as I present thisbudget.7.
 
Sir, in order to realise this vision,it is critical that we build on theachievements already registered undervarious economic diversificationprogrammes the Government has pursuedover the years. We cannot afford to slowdown on these programmes as the risks of dependency on the mining sector haveonce again come to the fore during thecurrent global economic crisis. Sir, ourcountry has abundant opportunities fordiversification, and it is time for us toaccelerate our efforts to harness them.8.
 
Sir, just as we expect citizens towork hard to drive our economy forward,they expect Government to play its role increating a conducive and competitiveenvironment for wealth creation andpoverty reduction in every part of ourcountry.9.
 
Mr. Speaker, in view of the urgentneed for accelerated diversification and
 
 - 2 -enhanced competitiveness, the theme forthis year’s Budget is “
Enhancing growththrough competitiveness anddiversification.”
10.
 
Mr. Speaker, my address thisafternoon follows a slightly differentpattern from previous years in order tobring together Government’s policyobjectives and budgetary allocations for2009. This will enable both HonourableMembers as well as the public at large tobetter appreciate the underlying rationalebehind this Budget.11.
 
This Budget address thereforecontains five parts. In Part I, I give anoverview of the performance of the globaleconomy during the past year. In Part II, Idiscuss developments in the Zambianeconomy during 2008. In Part III, I detailthe underlying policy measures that willguide the Budget. In part IV, I present the2009 Budget and supporting Policy,Expenditure and Revenue measures.Finally, in Part V, I conclude my address.
PART IDEVELOPMENTS IN THEGLOBAL ECONOMY
12.
 
Mr. Speaker, preliminary dataindicate that global economic growth in2008 slowed to 2.5 percent from 3.7percent in 2007. This was on account of the onset of recession in advancedeconomies in the last two quarters of theyear, triggered by the turbulence in thefinancial markets of these economies.13.
 
Sir, emerging economies such asBrazil, Russia, India, and China continuedto drive global growth in 2008. However,growth in these economies wassignificantly dampened as a result of theglobal economic crisis.14.
 
Sir, Sub-Saharan Africa’s limitedintegration with the global financialsystem saw the continent posting morerobust growth compared to advancedeconomies. Growth in the region wasprojected to be 5.4 percent compared withthe 1.3 percent growth recorded inadvanced economies.15.
 
Mr. Speaker, a significantconsequence of the global financial crisiswas the dramatic collapse of commodityprices in 2008. Oil prices, which reachedrecord highs of US$ 147 per barrel inJuly, fell significantly to US$ 48 perbarrel at the end of the year. Similarly,copper prices reached a record high of US$ 8,985 per tonne in July, beforeplummeting to US$ 2,902 by the close of the year, representing a 67.7 percent fall.Prices for other key commodities such asfertiliser also followed similar trendsduring the year.16.
 
Sir, on the inflationary front, fueland food prices were high in the first half of the year, contributing significantly toinflationary pressures around the World.These inflationary pressures were acutelyfelt in developing countries, includingsub-Saharan Africa where inflation rose to11.7 percent from 7.1 percent in 2007.However, by the close of the year,inflationary pressures began to subside,due to the significant shrinkage in globaldemand.17.
 
Mr. Speaker, these globaldevelopments had some negative effectson the domestic economy, adverselyaffecting growth, inflation, the exchangerate and the terms of trade.
 
 - 3 -
PART IIDEVELOPMENTS IN THEDOMESTIC ECONOMY IN 2008M
ACROECONOMIC
P
ERFORMANCE
 
18.
 
Mr. Speaker, in order to reducepoverty, the Government targeted anaverage annual growth rate of 7 percentover the Fifth National Development Plan(FNDP) period. Over the period 2006-2008, real Gross Domestic Product (GDP)growth averaged 6.1 percent per annum,which while robust, was below the FNDPtarget.19.
 
Sir, macroeconomic performancein 2008 was weaker due to unprecedentedglobal and domestic events. As a result,growth was lower than projected, whilstinflation and interest rates were higher.Preliminary estimates indicate that theZambian economy grew by 5.8 percent in2008. This performance was mainlydriven by growth in the transport, storageand communication; mining;manufacturing; and trade sectors.However, this was lower than the 6.3percent achieved in 2007. The poorperformance of the agricultural sector, anda slowdown in the construction sectorcontributed to the lower than expectedgrowth.20.
 
Although the mining sectorregistered positive growth, it was affectedby a sharp fall in world copper prices inthe second half of the year, therebydampening the prospects of higher growthand profitability. The agriculture sector,which employs the largest share of ourworkforce, experienced negative growthon account of heavy rains that resulted inflooding in some areas, thereby destroyingcrops. However Mr. Speaker, the countryrecorded a food surplus.21.
 
Mr. Speaker, Government policywith regard to inflation in 2008 and overthe FNDP period is to achieve and sustainsingle digit inflation. In the last threeyears, this has generally been achievedwith inflation outturns of 8.2 percent and8.9 percent, in 2006 and 2007,respectively. However, the pass-througheffects of high international oil and foodprices resulted in the inflation outturn for2008 being significantly higher at 16.6percent against the target of 7 percent.Food inflation in particular, accelerated to20.5 percent compared with 5.9 percent in2007.22.
 
Sir, the exchange rate was alsoaffected by the effects of the globalfinancial crisis. This resulted in the sharpdepreciation and increased volatility of the exchange rate of the Kwacha,particularly in the last quarter of the year.The Kwacha depreciated by 27.3 percentagainst the US dollar to an average rate of K4,882 in December 2008 compared toK3,835 in December 2007. However, theKwacha appreciated by 6.3 percent and11.1 percent against the Pound Sterlingand South African Rand, respectively,reflecting their weakening against the USDollar.23.
 
Mr. Speaker, an importantmacroeconomic objective over the FNDPperiod has been to maintain a prudentfiscal policy. In spite of a number of challenges, both domestic and external, Iwish to report that the budget deficit for2008 was favourable and stood atK1,394.3 billion or 2.7 percent of GDP,and was below the projected deficit of 3.0percent.
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