Maravi

Macroeconomic targets for 2007 too ambitious, says economist

Macroeconomic targets for 2007 too ambitious, says economist
By Kingsley Kaswende
Tuesday February 13, 2007 [02:00]

ZAMBIA’S macroeconomic targets for 2007 are too ambitious, an economist has observed. Dr Cosmas Musumali, who is immediate past vice-president of the Economics Association of Zambia (EAZ), said the contents of the 2007 budget were not tallying with what the government wanted to achieve. The government has targeted to achieve a real gross domestic product (GDP) growth of seven per cent. The economy grew by 5.8 per cent in 2006, according to official figures. The government had projected it would grow by six per cent.

Zambia has in the past five years recorded growth averaging 4.5 per cent. The government has also targeted to reduce inflation by five per cent, reduce domestic borrowing to 1.2 per cent of GDP and to raise gross international reserves to at least 2.5 months of import cover.

Last year, the government had targeted to reduce inflation to 10 per cent, reduce domestic borrowing to 1.6 per cent of GDP and maintain the coverage of official gross international reserves to at least 1.5 per cent of imports. Magande said last year’s targets were achieved due to private sector investments in agriculture, mining, manufacturing, construction and tourism.

Dr Musumali, however, said this year’s seven per cent growth would not come spontaneously, but would be a result of the policies embedded in the budget. He said the four key contributors to the growth of the economy - agriculture, mining, construction and tourism - were not expected to achieve enough growth to contribute to the seven per cent target. “The 3.9 per cent growth in agriculture is not enough to contribute to the GDP growth target. With the poor rains this year it is most likely that the agricultural sector will not perform beyond five per cent growth,” he said.

Dr Musumali said the 11 per cent growth in mining over the past few years was a good indicator but that projections of metal prices in the next two years were not positive. “The prices are likely to stabilise at a lower level while output is expected to be high but the net effect is that growth will not be more than 11 per cent.

He said the tourism sector only recorded a 3.1 per cent increase in tourist arrivals, slower than medium term expenditure framework targets, while the construction industry was not showing significant growth.

On inflation, Dr Musumali said the government would have been safer to just its aim at containing the current levels of around eight per cent. “It is easier to reduce inflation from 30 per cent to 20 per cent but you need very strenuous measures to move it down to a single digit. The five per cent is an ambitious target,” he said.

On government borrowing, Dr Musumali said the MTEF was projecting higher borrowing, inconsistent with 2007’s projection. He, however, was content with the projection on gross international reserves, which he said resonated with the available resources in the country. “If we can contain these throughout the year, we should be able to be on track,” said Dr Musumali.

Labels: 2007 BUDGET, MAGANDE

posted by MrK @ 9:58 PM