Former finance minister Ngandu Peter Magande has delivered a clear and concise explanation to interpret finance minister Alexander Chikwanda’s statement that Zambia is facing a budget deficit.
Below is Magande’s explanation
A deficit is the difference between tax revenues and expenditure in a budget.
During my time as Minister of Finance and National Planning, there were planned deficits and these were announced at budget presentation time and during budget briefs during the year.
Due to the heavy foreign debt of US $7.2 billion, there was no foreign borrowing to cover the deficit and therefore the deficit was covered by wholly by domestic borrowing.
The deficit is expressed as a percentage of Gross Domestic Product (GDP). The actuals were 5 (2003), 2.2 (2004), 1.9 (2005), 1.5 (2006), 0.95 (2007), 2.7 (2008). Inflation in 2006 reduced to single digit of 8.2 percent, the lowest in 30 years.
All these figures are in the budget speeches for appropriate years.
The Kwacha/dollar exchange rate was within K3,000 to an US $ in 2006. Zambia’s foreign debt tumbled from US $7.2 billion to US $900 million.
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