26 Oct 2016

Review of the National Development Plan 10 (NDP 10) depicts that the economy performed slightly better than the original forecast.

Presenting the Draft NDP 11 to Parliament on Wednesday (October 26), the Minister of Finance and Economic Development, Mr Kenneth Matambo said NDP 10’s average actual GDP growth rate per annum was 3.9 per cent against the projected growth rate of 3.3 per cent.

Mr Matambo noted that, the actual average growth rate was below the Vision 2016 target growth rate of 7.5 per cent, owing to the merchandise imports which exceeded merchandise exports, slow growth in domestic final consumption expenditure, causing weak aggregate demand in the economy, and slow growth in gross physical capital formation.

With regards to economic diversification, Mr Matambo said there were signs of economic diversification with the non-mining sectors of trade, hotels and restaurants, banks, insurance and business playing a major role in driving the growth of the economy, while mining sector declined.

“The mining sector contracted by an average of 3.4 per cent per annum, during the entire plan period, while the non-mining sector grew by 5.6 per cent per annum,” he said.
He further said the increased contribution of non-mining sectors saved the economy from experiencing full-blown recession.

This, he said underscored the significance of continued vigorous efforts to diversify the economy and support of the non-mining sector.

Minister Matambo also said government revenues during NDP 10 were higher than the overall NDP 10 projected revenues.

He said for the first four years of the plan, revenues significantly exceeded the target for NDP 10, however from 2013/14 onwards; the revenue outturn underperformed the NDP 10 targets.

“Of significance is that, the government revenues were still driven by Mineral and Customs and Excise Revenues, (mineral revenues accounting for 35.8 per cent of total revenues and Customs & Excise accounting for 26.8 per cent). This calls for urgent efforts to increase and diversify the revenue base,” he said.

In addition, he said it was encouraging that for the entire NDP 10 period, government was also able to maintain one of its fiscal rules of funding recurrent expenditure through non-mineral revenues.

“The fact that mineral revenues were not used to cover recurrent costs is a sign of budget sustainability,” he said.

With regards to external sector development, Minister Matambo said valuable lessons had been learnt during NDP 10 for the need to bolster economic diversification during NDP 11.

He said even though the overall balance of payments had been in surplus for the entire NDP 10 period, a worrisome trend during NDP 10 was a steady decrease in the share of non-traditional exports, as part of total exports.

The Finance minister said for instance, while in 2009 the share of non-traditional merchandise exports was about 10.0 per cent, it decreased to 8.0 per cent in 2010 and reached 3.0 per cent by 2013.

“This suggests that limited export diversification has taken place,” he said.

He further said in order to bolster economic diversification during NDP 11, particular attention should be on creating new and growing non-traditional exports.  

The minister also noted that a modest increase in the share of exports of services was registered during the plan period.

Mr Matambo said it was envisaged that the global financial and economic crisis was going to undermine the implementation of some of the then on-going high return projects that were pivotal to economic growth.

Government hence increased development expenditure by 27 per cent to stimulate economic growth.

 The minister said the bank rate was reduced several times through NDP 10 which led the commercial banks’ prime lending rates going down from 11.5 per cent in 2009 to 7.5 per cent by July 2016.

 Inflation rate also declined from an average of 7.4 per cent in 2010 to 2.6 in August 2016. ENDS