In 2013 to date, we have achieved a net financing position with the external sector, a trend which will foreseeably continue and become more accentuated over the rest of the year, to the point of placing the overall balance of payments on current and capital account for the whole of 2013 at over 2% of GDP. Nonetheless, the accumulation of major external deficits between 2007 and 2011 (amounting, over these five years, to € billion, 32% of our GDP in 2012) has led to a high debit international investment position, and years will be needed to reasonably reduce our dependence on external saving. Private-sector deleveraging continues to progress, although the unfavourable course of income is checking the speed of the process. It is moreover likely that debt/income rebalancing will prolong the contraction of credit at the aggregate level, although we may expect its impact to be increasingly less. This is compatible with a reallocation of funds towards the more productive agents with healthier financial positions. In any event, measures are needed aimed at reallocating funds towards firms with greater potential in terms of activity and employment and with financing difficulties, a situation particularly prevalent among small and medium-sized enterprises. Fiscal consolidation Let me now address the public finances situation. BIS central bankers’ speeches  3  The general government deficit target for 2013, at 6.5% of GDP, entails a reduction of almost 5 pp from its 2009 of 11.2% of GDP.
Continued implementation of prudent monetary and fiscal policies, fairly favourable developments in the exchange rate coupled with pro-growth and pro-poor agricultural policies that have led to an increase in food supply and subsequent improvement in the country’s food security largely explain the favourable developments in inflation. For instance, the country recorded an increase in maize surplus to 250,000 metric tons (mt) this consumption period from 160,000 mt during the 2006/2007 consumption period. With respect to the money market, given lower inflation and yield rates on Government securities, commercial banks lending rates have been on the downward path. This can be illustrated by the nominal average lending rates which declined to around 28% in December 2006 from about 34% in December 2005, and further fell to 24.3% in September 2007. This is consistent with Government’s desire of making more funds available for priority sectors of our economy at reasonable cost, in line with the objectives the Fifth National Development Plan, 2006-2010. Ladies and gentlemen, testimony to this was the recent lowering of the statutory reserve ratio by the Bank of Zambia to 8% from 14% effective 1st October 2007. We expect this action, will release more funds to the commercial banks for on-ward lending to the priority sectors. Availability of investible funds to sectors such as agriculture, manufacturing, tourism and mining will stimulate further growth in the economy, create more employment and incomes, and contribute to alleviation of poverty.