Policy Analysis TO advance the discussion on the country’s 2012 economic performance, I want to compare the level of some real developments for the year to those recorded during the first half of 2013. The 2013 first half trends are as reported by the Bank of Zambia (BoZ) last week. BoZ Governor Dr Michael Gondwe said that although economic conditions were challenging during the period between January 1 and June 30 2013, overall activity in the real sector remained positive. This is particularly when assessed against developments in the corresponding period in 2012. According to the 2012 Economic Annual Report by the Ministry of Finance, the national food balance sheet for the 2012/13 agriculture marketing season indicated that the country produced sufficient food for national consumption. The maize surplus of 1,053,333 tonnes was projected for the season on account of opening stocks of maize amounting to 770,931 tonnes, combined with the anticipated harvest for 2012/13 season. The balance sheet shows surplus in wheat and cassava. For the first half of this year, the country has recorded a maize surplus of 453,995 tonnes. On a year-to-date basis, copper production has gone up to 477,293 tonnes, milk output at 20,808,014.2 litres and beer output at 1,041,686 hectolitres as at end-June 2013. This translate into 13.3 per cent, 15 per cent and 24.6 per cent rise respectively above the outputs in the corresponding period of 2012. Tourism posted a decrease in the number of international arrivals in 2012 but this will seemingly change this year. The sector has, in the first two quarters of this year, registered increased international arrivals at 24,213 passengers which are 26.9 more than last year’s 19,077. The sector is expected to improve significantly with the co-hosting of the United Nations World Tourism Organisation (UNWTO) General Assembly from August 24 to 30 2013 in Livingstone. On the monetary policy, during the first half of 2013, the authorities continued to be focused on achieving the end-year inflation target of six per cent. There were, however, myriad external and internal challenges, like the removal of fuel subsidies which meant increasing fuel pump prices and poor rainfall pattern during the 2012/2013 farming season leading to the anticipated reduction in the sector’s contribution towards national economy. For the first four months, the economy looked set to meet the six-per cent inflation target as annual overall inflation slowed down from 7.3 per cent in December 2012 to 6.5 per cent in April 2013. This was, however, short-lived because the inflation rose to seven per cent in May and reverted to 7.3 in June 2013. This according to Dr Gondwe reflected the pass-through effects of the depreciation of the Kwacha against major foreign currencies and the impact of the rise in the prices of petroleum products in May 2013. On domestic credit, the amount rose by 33 per cent to K26,165 billion in June 2013 from K19,726.8 million as at end-December 2012. This was on account of the increase in lending to Central Government and the private sector, contributing 23.8 and 8.8 percentage points, respectively, to domestic credit growth. Despite the increase in lending to Government, total public debt remains sustainable, at about 29 per cent of GDP well within the internationally acceptable threshold of 60 per cent of GDP. The commercial banks average lending rate marginally increased to 16.3 per cent in June 2013 from 16.1 per cent in December 2012. This was after the BoZ policy rate was adjusted to 9.5 per cent in June 2013 from 9.25 per cent in December 2012. The overall merchandise trade surplus marginally declined to US$356 million from US$364.6 million registered during the second half of 2012. The exchange rate was characterised by a depreciation trend. This was attributed to the high import bills and market participants’ position taking ahead of implementation of the Statutory Instrument number 55. This depreciation was moderated by steady supply of foreign exchange by corporate sector, in particular the mining companies and foreign financial firms. Against this background, Kwacha depreciated by 6.3 per cent, 5.6 per cent and 0.5 per cent against the US dollar, Euro and Pound to close at K5.4721/US$, K7.1671/€ and K8.3439/£, respectively. However, the Real Effective Exchange Rate (REER) has been relatively stable since September 2012, with the index averaging 99.26, reflecting maintenance of the country’s external competitiveness. The overall financial performance and condition of the banking sector for the first half of 2013 was satisfactory. Overall, the banking sector’s total primary capital increased by 79.8 per cent to K4,609 million as at end-June 2013 from K2,563 million as at end-January 2012 largely due to the revision in minimum capital requirement. For comment/other contributions call: 0955431442, 0977246099 or email: jmuyanwa@gmail.com.