Summary Upward pressure is expected to come from pass-through effects of the depreciated exchange rate
LUSAKA (AFP) - Zambia s finance minister cut the country s growth forecast sharply on Friday as he presented the budget amid a collapsing currency, falling copper prices and crippling power shortages.
The kwacha, one of the world s worst performing currencies, has dropped 46 percent against the dollar this year, and the price of copper -- on which Zambia relies for its foreign earnings -- has fallen 22 percent in 12 months.
"Given the adverse global economic environment, Zambia s growth in 2015 is expected to be much lower than the 7.0 percent that I projected in October 2014. I now project growth to be 4.6 percent," Alexander Chikwanda said.
"Upward (inflationary) pressure is expected to come from pass-through effects of the depreciated exchange rate as well as higher demand for grain in the region."
Chikwanda said that Zambia had earlier anticipated that copper output would be 808,000 metric tonnes this year, but stood at just 441,584 metric tonnes at the end of August.
"With this performance, it is unlikely that the target will be met. The major factors for this negative performance are the low copper demand and prices, coupled with electricity constraints," he said.
Electricity supply in Zambia has been hard hit by low water-levels and poor maintainance in Lake Kariba, where hydropower plants supply most of the country s power.
Zambia, which has grown at seven percent annually in recent years, was seen as an African success story until the fall in copper prices and a series of government policy reversals undermined investor confidence.
Mining giant Glencore has already mothballed output at one copper project as demand of commodities has been hit by slowing growth in China s economy.
