Government should avoid spending overruns, boost revenue: IMF official

Economic growth for Africa's No. 2 copper producer is expected to slow 4.6 percent in 2015 from an initial projection of 7 percent because of falling commodity prices and chronic power shortages.

IMF Zambia resident representative Tobias Rasmussen told Reuters the southern African state should effectively implement the budget to cut the fiscal deficit to 3.8 percent of gross domestic product (GDP) in 2016 from 6.9 percent in 2015.

Zambia reduced allocations for non-core recurrent expenditure by more than 50 percent and had taken measures to enhance domestic revenue collection, which was seen rising to at least 20.4 percent of GDP in 2016 from 18.1 percent in 2015.

"This means preventing any spending overruns and making inroads on improving revenue collection," Rasmussen said, adding that more details on new revenue measures were needed.

Public finances had lately been under pressure in Zambia, and it was therefore positive that the 2016 budget speech recognized the challenges and the need for fiscal consolidation, he said.

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"The lower deficit would go a long way towards eliminating what has been a key imbalance in the economy, bringing needed stability and helping reduce high interest rates," he said.

Ratings agency Fitch expects Zambia's budget deficit to remain elevated due to a rapidly falling currency, an ongoing energy crisis and falling commodity prices.

The ambitious fiscal consolidation plan in Zambia's 2016 budget will prove challenging due to its reliance on raising revenue rather than cutting expenditure, the ratings firm said on Monday