By Agness Changala
Secretary to Treasury Felix Nkulukusa says the continued depreciation of the kwacha will not affect the budget implementation because it was presented, and will be implemented in Kwacha.
The Kwacha has continued to depreciate against major convertible currencies and this is mainly attributed to low income from the mining sector, which is the major forex earner for Zambia.
The depreciation of Kwacha has also resulted in the country not benefiting from the drop in the oil prices on the international market for the past three months that the Energy Regulation Board (ERB) has reviewed the pump prices of fuel.
Asked if the depreciation of the local currency will have a negative effect on the implementation of K177. 9 billion budget which the government unveiled for this year, Nkulukusa said the government does not see the budget being affected.
“First and foremost is that we implement the budget in Kwacha. So if we implement the budget in Kwacha and we present it in Kwacha value, it means that the budget won’t be affected, but if some of the budget would be in foreign currency. But also against that budget, we had some foreign currency that was coming, and all that foreign currency that was coming when it comes, it will come at a higher Kwacha than we estimated. So at the end of the day, you can do an analysis and say what would be the impact but we don’t see the budget being affected.”
He explained that the exchange rate under which the budget was proposed, was for the year and not for January.
“So the Kwacha may depreciate and be K26 in January but it may be K18 or K19 in December. So you can’t make a decision now. So at the end of the year, you can do a stock take and say how the budget was affected,” Nkulukusa said.
He however said, if one had an assumption that most of the expenditure would be in Dollars, the budget may be affected.
“But for you to even think that the budget will be affected, unless you have got an assumption that most of the expenditure of the budget will be US Dollars. And therefore, because it’s Kwacha … the only expenditure in the budget that will be in US Dollars that would affect the deprecation is the debt service. The foreign debt service and the foreign debt service is the one we have negotiated with our cooperating partners and is the one that we are spending. The one that we should have been paying 2 billion now we are saying we will be paying just about 100 million or there about. So it doesn’t affect us, do we agree?” Nkulukusa argued.
He also said the government was restructuring the debt and that in the next 10 years, they will only pay $750 million Dollars in debt service to the official creditors.
“So if we didn’t restructure the debt, we would have impacted on the foreign debt service. But we are restructuring the debt and we are reducing that cost, so it will be mitigated through that,” explained Nkulukusa.
