The Zambian government has been advised to adjust its budget downwards by reducing areas of expenditure to match with revenue which is expected to suffer tremendous loss due to the appreciation of local currency kwacha.

Lusaka-based economist John Kasanga said the revision of the budget should be influenced by anticipated revenue inflows though the revenue position could not be normalized by a revised budget.

"In this regard, rather than make a three-piece suit, the government has to adjust and focus on a two-piece suit as that is the most that the cloth available can be used for," Kasanga was quoted by Monday's Zambia Daily Mail as saying.

Kasanga was responding to the recent remarks by Finance Minister Ng'andu Magande that the government would suffer a financial gap of 800 billion kwacha (230 million U.S. dollars) due to the appreciation of the kwacha.

The Zambian kwacha has appreciated dramatically in the past 12 months from one dollar against 4,600 kwacha a year ago to the current level of one dollar against 3,500 kwacha.

The Zambian government has attributed the kwacha gain mainly to the debt write-off by western nations after the country reached the Heavily Indebted Poor Country (HIPC) completion point in April last year.

As one of the main copper producers, the windfall from the copper industry on the back of exorbitant copper prices on the international market was considered another factor that led to the appreciation of kwacha.

Kasanga said the kwacha gain would in the medium to long term promote import trade in finished products while on the other hand exporters are rapidly losing their competitiveness in both export and domestic markets.

Source: Xinhua