Reality Check: IMF’s Downgrading of Economic Growth for 2024 Shatters 2025 Budget
Setting ambitious goals in economic planning is generally viewed as a proactive approach to advancement. Nevertheless, it is crucial for these aims to strike a balance between being ambitious and realistic. The recent revision by the IMF to Zambia’s economic growth projection, reducing it from 2.3% to 1.2%(Bloomberg), casts uncertainty on the achievability of the government’s objective of attaining 6.6% economic growth in the 2025 budget.
The government’s aspiration for a 6.6% economic growth in the 2025 budget is commendable, but it is imperative to consider the prevailing economic and financial circumstances. The recent revision of the IMF’s forecast highlights the challenges impeding the economy, casting doubt on the feasibility of the ambitious target and highlighting the need for more grounded projections in the budget planning process.
The IMF has revised Zambia’s economic growth forecast, raising concerns about the feasibility of the country achieving a significant increase from 1.2% to the projected 6.6% within a short period. The country’s ability to meet some of the fundamental targets outlined in the 2025 budget, such as the government’s aim to utilize 80% of domestic resources, may result in a rise in domestic debt and crowd out the private sector from accessing credit markets. This could lead to a decrease in tax revenue from private enterprises, putting additional strain on households and local businesses.
The optimistic forecasts for higher VAT collection in the 2025 budget could exacerbate the financial strain on households and local businesses already facing challenges within the nation’s economy. Additionally, the UPND government is implementing contractionary measures on both monetary and fiscal fronts to stabilize the economy. Considering the concerns raised, along with the downgraded economic growth forecast for 2024, it seems apparent that the projected 6.6% is unrealistic, warranting modifications to the 2025 budget.
Hence, the IMF’s downgrading of economic growth forecasts for 2024 acts as a reality check for the ambitious 6.6% economic growth target set for the 2025 budget. The UPND government must adjust the budget accordingly to reflect current economic conditions. Neglecting to make these adjustments may result in an impractical and unachievable budget, potentially exacerbating economic challenges in the upcoming year
In essence, it is crucial to balance ambition with practicality and a thorough grasp of the present economic landscape in economic planning. The recent adjustment of growth forecasts by the IMF should serve as a prompt for the government to reevaluate its objectives and make necessary adjustments to establish a sustainable and attainable trajectory for economic growth for the 2025 budget.
The Struggle Continues
Sensio Banda
Former Member of Parliament
Kasenengwa Constituency
Eastern Province