While most of the world is struggling with stagnant growth rates, Zambia’s Minister of Finance, Dr. Alexander Chikwanda has a unique challenge: maintaining policies to support the economy’s rapid growth. Following a growth rate of 7.3% in 2012, Dr. Alexander Chikwanda is poised to see an average Gross Domestic Product increase of 7% per annum over the next five years. In the midst of rapid expansion and
increase of Foreign Direct Investment, the Government of the Republic of Zambia has still managed to stabilise its own currency (Zambian Kwacha: KR) to guarantee continued and stable growth in the years to come.
Effective on January 1 2013, the Zambian Kwacha was rebased, truncating the currency by one thousand. Whereas the Zambian Kwacha was subject to hyper-inflation in the past decades, the Patriotic Front Government set the new currency exchange to set the tone for a more stable economy. Along with this measure the Bank of Zambia recapitalised banks to balance the reduction in interest rates. “The high interest rates that banks offered to small and medium enterprises were stifling growth, we are working to create a more appealing capital market for everyone within our economy.”
Dr. Alexander Chikwanda stresses the need to increase investment and assuages concerns about recent statutory instruments. Recent legislation such as SI-55 that gives the government access to monitor inflows and outflows of foreign exchange raised eyebrows amongst the business community, initially. However, it is becoming clearer that these measures will work to benefit the business community by giving the government a much clearer picture of the flows of currency in the economy. “How can the Ministry of Finance plan for the next fiscal year without sufficient information? If we do not have an accurate picture of the growth in the economy, there is no way to prepare for the next year.”
The Government of the Republic of Zambia has also made difficult choices to curb government spending and increase investment even when these moves have been unpopular. Dr. Alexander Chikwanda explains that the removal of fuel and maize subsidies may have been a difficult choice, however he sees the silver lining in future economic growth because of this sacrifice. “While there is continuing worldwide economic turmoil, it is necessary for the government to reduce unnecessary expenditure. We believe that the decision to cut subsidies will result in long-term economic growth, while also freeing government funds for developmental projects.”
Since the Patriotic Front Government was elected as the majority in parliament, there have been strides to make certain that Zambia will see stronger growth in the future. Dr. Alexander Chikwanda sees the importance of developing infrastructure and manufacturing to establish Zambia’s position as a middle-income country in the years to come. “Even if a nation has the world’s best pineapples, that is not enough to build an economy”, begins Dr. Alexander Chikwanda. “There must be roads and rail lines so that the pineapples will reach a manufacturer who can make pineapple juice from the fruit. The pineapple juice must then be packaged by another company; that is what we need in Zambia: Start-to finish production.”
Dr. Alexander Chikwanda sees Foreign Direct Investment as integral to the development of Zambia. The global business community also sees the eminent growth in the Zambian Economy. When the Government of the Republic of Zambia issued debt in the form of a Eurobond in early 2013, the response was resounding. The amount of debt issued was €552.77 million, and its oversubscription amounted to over fifteen times the amount on offer (€8.77 billion). However, Dr. Alexander Chikwanda encourages many more investors to invest in Zambia. “The theme of this year’s International Trade Fair in Ndola is Value Addition Through Global Partnerships. Zambia will grow, and future partnerships with members of the International Business Community will be the primary driver. We encourage everyone to come see Zambia. The opportunities are numerous, and we are building the infrastructure for an economy that will grow for the years to come.”
