UPDATE 1-Zambia finance minister sees 2019 GDP growth at 2.5%

(Adds detail, context)

LUSAKA, July 25 (Reuters) - Zambia's economy is projected to grow by around 2.5% this year, down from an initial projection of almost 4%, Finance Minister Bwalya Ng'andu said on Thursday.

Africa's second-largest copper producer has encountered declining fiscal space for developmental projects as most of its resources have been used on debt servicing, Ng'andu added in a speech to an economic summit in Livingstone in southern Zambia.

Ng'andu, a former deputy central bank governor appointed finance minister this month, said the economy had been hurt mainly by adverse weather conditions that had dampened agricultural and energy output, while tight liquidity conditions had also hit businesses and economic activity.

The Zambian government needs to pay arrears to support private sector growth, Ng'andu said.

Zambia's external debt rose to $10.05 billion at the end of 2018, compared with $8.74 billion a year earlier, raising fears that the southern African country is headed for a debt crisis.

Zambia is trying to shrink a fiscal deficit that amounted to 7.5% of gross domestic product last year. (Reporting by Chris Mfula; Editing by Alison Williams)