Economy In Poor Shape As Covid-19 Slashes Revenue By 20%

Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19, Finance Minister Bwalya Ngandu has said. 

Speaking this morning at an economic briefing in Lusaka’s Mulungushi International Conference Centre, Dr Ngandu told reporters that the estimated losses did not factor in the tax relief measures announced on 26th March, which are expected to incur further reductions in revenue. 

The figures are based on the impact of Covid-19 on Zambia’s economy, with the disease expected to peak around April and May.

“If we further assume that the pandemic will be quenched by August 2020, we project that the negative impact on revenue will continue until December 2020,” the minister said. 

Forecasts indicate the disease will particularly affect the mining sector, with the price of copper on the London Metal Exchange remaining low until June. This will incur further losses to the government through a drop in mineral royalties and income tax payments from mining companies. 

Dr Ngandu said the pandemic is expected to result in a slow down in economic activity across all sectors, including manufacturing, transport, power, retail and tourism. 

President Lungu has therefore instructed the Ministry of Finance to collaborate with the Ministry of Commerce, Trade and Industry, as well as other stakeholders, to come up with measures to help sustain businesses during this difficult period. 

The Centre for Trade Policy and Development (CTPD) has said that the decline in economic activity will be particularly burdensome for those living below the poverty line. The monthly cost of living for a family of five has already increased from K5,395 in January 2019, to K7,411 in January 2020, and jobs are being cut across all sectors. 

The CTPD called on government to seek debt restructuring arrangements and relief on interest payments with its creditors, in order to free up much-needed resources for those suffering as a result of the Covid-19 pandemic. 

The government has since said it will hold talks with the International Monetary Fund (IMF) to investigate possible debt relief options. Previously President Lungu’s government had been unwilling to cooperate with the fund, which now predicts Zambia’s economy will contract by 3.5% in 2020.