GDP rebasing to create more room for Infrastructure Debt Financing

File: Construction of a roads in Zambia through Chinese project finance Debt.

Africa’s second largest copper producer, Zambia has announced plans to undertake a Gross Domestic Product – GDP rebasing exercise in the 2019 fiscal year.

This was revealed during the budget presentation and post budget discussions by ex-banker and current Finance Minister, Margerate Mwanakatwe.

She stated that “in 2019 Government will undertake an exercise to rebase the Gross Domestic Product, an exercise last conducted in 2012”.

Mwanakatwe further stated that “the rebasing of the Gross Domestic Product – GDP will provide reliable and updated information on the current size and structure of the national economy”.

The Finance Minister stated that “the rebasing will also provide Government with an opportunity to update and develop appropriate social and economic indicators to measure progress in achieving the objectives”

Once rebased, the country’s GDP is expected to expand by over 20%. The current debt to GDP ratio which is mostly used by most government lenders and multilateral institutions like the World Bank and the International Monetary Fund – IMF use is being based on a GDP number last rebased in 2012.

Some of the economic areas expected to contribute to the expansion of the GDP number for Zambia includes the Livestock and Fish farming economic sub-sector.

The other notable sector that has expanded massively between 2010 and 2018 is the Roads and Transport industry whose expansion has been clearly seen from expanded road infrastructure and tolls as well as air-traffic expansion and infrastructure.

The last GDP rebasing exercise in 2012 saw Zambia’s gross domestic product expand by over 25% after a rebasing exercise that updated the base year from 1994 to 2010 according to the Central Statistics Office.

The need for a rebasing exercise is also imminent as government revenue has been expanding aggressively. A check in the current budget shows that the 2019 budget has expanded by about 21% year on year.

Zambia needs to fund its huge infrastructure gap across its ten regions/provinces. The 2019 budget saw the country announce plans to scrap VAT and replace it with a sales tax, an exercise if successful will result in the addition of about USD1 billion annual revenue to the treasury.