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By Shapi Shacinda

LUSAKA (Reuters) – Zambia hopes to cut its fiscal deficit to below 2.0 percent of GDP this year and will take measures to fight a worrying current inflation rate of 13.2 percent, Finance Minister Ng’andu Magande said on Monday.

He told Reuters in an interview that Zambia’s central bank intended to mop up excess liquidity in circulation in a bid to rein in inflation.

The latest target for the fiscal shortfall is lower than the the 3.2 percent deficit figure forecast in the 2008 budget but higher than the 0.95 percent fiscal deficit in 2007.

Magande said the budget has planned supplementary expenditure to finance a presidential vote expected in November following the death last month of President Levy Mwanawasa.

“We are on course, but perhaps the elections (expenditure) will disrupt it (fiscal deficit) because the amount required is quite substantial,” he said.

“We will realign some expenditure just a bit to cover up, but there is still need for a (supplementary budget) and if we have one, obviously the fiscal deficit will rise but we will work hard to keep it below 2.0 percent,” Magande said.

The death of Mwanawasa, who won praise abroad for tackling corruption and turning copper-rich Zambia into one of the continent’s biggest success stories, has raised questions about the political and economic direction of the country.

Magande, respected by Western donors for his tough economic management, is seen as a top contender for the presidency.


An International Monetary Fund (IMF) mission will visit Zambia this month for a periodical review of the economy to see if the government is meeting economic targets, Magande said.

The southern African country hopes for an annual inflation rate of 7.0 percent in December and also hopes its economy will accelerate to gross domestic product growth of 7.0 percent this year, from 6.2 percent in 2007.

Magande said the Treasury would forge ahead with plans to suspend some less important economic projects in order to direct funds to the presidential election.

But the government would still have to provide additional funds for the $3 billion 2008 budget unveiled in January, Magande said.

Zambia has won praise from the IMF and western donors for its prudent economic management, which has seen its dependence on foreign aid decline significantly in recent years.