The performance of Zambia's economy since 2002 has been "encouraging" with most macro-economic indicators showing improvement, President Levy Mwanawasa said Friday when he officially opened parliament.

The rate of inflation which averaged 20.4 percent between 2002 and 2004 has dropped to 15.9 percent as at December 2005, the lowest in more than two decades, said Mwanawasa. He attributed the positive development in inflation to "prudent fiscal and appropriate monetary policies" taken by his New Deal government since he took office in 2002.

Improvement in the supply of food and increases in exports of both metal and non-metal products have also been key factors in moderating inflationary pressures despite the high prices of petroleum products on the international market, said the president.

Interest rates dropped dramatically, too. The average lending base rate by commercial banks stood at 47.4 percent at the beginning of 2002 and fell to 42.4 by the end of the same year. In December 2003, the interest rate declined to 37.7 percent and it further went down to 29.8 percent a year later. By year-end 2005, the interest rate was pegged at 27.1 percent, more than 20 percentage points down from that of 2002.

Mwanawasa said this development had occurred mainly as a result of fiscal discipline on the part of his government. He noted that the decline of interest rates had enabled more people in business to access funds for investment in the productive sectors.

In the meantime, exchange rate of local kwacha against major foreign currencies shot up particularly in recent months.

"Our government has performed exceptionally well in maintaining the strength of the kwacha against major international currencies, " said Mwanawasa.

According to the president, the kwacha depreciated by 7.2 percent against the US dollar in 2003 and a further 0.5 percent in 2004. In 2005, however, the exchange rate of the kwacha against dollar appreciated by 12.2 percent as at the end of November and has continued the upward trend to this day.

He attributed the gaining of the kwacha to a number of factors such as improvement in the government's fiscal management, which was reflected in the reduced domestic fiscal debt to 1.3 percent of Gross Domestic Product (GDP) in 2004 from 4.1 percent in 2002, the favorable performance of metal and non-traditional exports which resulted in steadily growing supply of foreign exchange on the market.

In addition, the fulfillment of the Heavily Indebted Poor Countries (HIPC) initiative completion point in April 2005 has led to the country receiving tremendous debt relief from both bilateral and multilateral institutions. As a result, there has been increased availability of foreign exchange on the domestic market as the governmental demand shrank quickly thus supporting the appreciation of the kwacha.

Though the appreciation of the kwacha would have adverse impact on non-traditional exports, Mwanawasa said, it would benefit the economy as a whole since a strong kwacha means lower inflation arising from lower costs of imports and lower interest rates as well.

Furthermore, the country's economic growth has been on an upward trend since 2002 when a 3.3 percent growth in real GDP was recorded. In 2003, the growth rated jumped to 5.1 percent and it further climbed to 5.4 percent in 2004.

This growth was driven mainly by the priority sectors of agriculture, tourism, manufacturing and mining, said the president. He further noted that growth rate in 2005 was expected to surpass the 2004 level.

Over the four-year period from 2002 to 2005, the Zambian economy has grown by an average of 4.5 percent, far higher than the 2.2 percent recorded between 1998 and 2001.

Per capita income has consequently been rising to a preliminary estimate of 2.6 million kwacha (about 750 dollars) in 2005 from 1. 8 million kwacha (about 514 dollars) in 2002. DIFFERENT VOICES

As the southern African country is preparing for its presidential and parliament elections which are scheduled to kick off at the end of this year, the president's speech received different comments.

Opposition United Party for National Development (UPND) Vice President, Sakwiba Sikota, accused Mwanawasa of deliberately avoiding critical issues such as the constitution.

"The speech is notable of what he did not address, especially the issue of the constitution. It is clear now that he seems to be the stumbling block to having a good constitution," he said.

Another opposition Member of Parliament Robert Sichinga said there was nothing new in the speech and the president was merely selling himself and his party for the forthcoming general elections.

Swedish Ambassador to Zambia, Christina Rehlen, was cited by Zambia News and Information Services (ZANIS) as saying the president's speech did not cover much, adding "more could have been done on that".

She, however, said Zambia was moving in the right direction as far as economic independence was concerned, adding that the year 2005 could be described as successful as the country recorded new investments in many key areas of the economy.

Source: Xinhua