Saturday, December 29, 2007

6.2% GDP growth won't be meaningful without jobs, says Fundanga

6.2% GDP growth won't be meaningful without jobs, says Fundanga
By Joan Chirwa
Saturday December 29, 2007 [03:00]

The expected 6.2 per cent Gross Domestic Product (GDP) growth this year will not be meaningful if unemployment is not addressed, Bank of Zambia (BoZ) governor Dr Caleb Fundanga has said. And BoZ has forecast that the country’s inflation rate would remain at the single-digit level during the first quarter of 2008.

During an end of year media briefing in Lusaka yesterday, Dr Fundanga said Zambia still had an enormous challenge of addressing high unemployment levels, considering the much acclaimed economic growth recorded in the past few years.

“A GDP growth of around 6.2 per cent is looking very rosy but what is happening to employment?” Dr Fundanga asked. “This is a key issue if we are going to be talking about GDP growth. We need to have high employment levels when the GDP is increasing.”

Dr Fundanga noted the need for massive investments in sectors that had a high potential for job creation.

“What we need is more investments into sectors such as agriculture, manufacturing and construction. Currently, the mining sector is the largest industry in the country but looking at technological advancements, most mines now are not employing as many people as they used to because some machines are computerised,” Dr Fundanga said.

“The construction sector is currently doing very well and the manufacturing sector is also coming up. These are among sectors that provide an opportunity for generating a lot of employment for our youths in this country.

For the manufacturing sector, we are looking at the implementation of the Multi-Facility Economic Zones (MFEZ) in Lusaka by the Malaysians and the Chambishi MFEZ being developed by the Chinese.”

Dr Fundanga said the agriculture sector could also assist in cutting down the high levels of unemployment through the establishment of agro-processing plants around the country.

“If we produce more especially from agricultural produce, this can offer a lot of permanent jobs,” Dr Fundanga said. “The growth we are talking about in the country should translate into more jobs for most of the people who are currently not employed.”

And Dr Fundanga said Zambia is likely to maintain the single digit inflation through into the first quarter of 2008.

Zambia’s current annual inflation rate stands at 8.9 per cent, up by 0.7 percentage points from 8.2 per cent recorded at the end of 2006.

“The overriding objective of monetary policy in 2008 is to consolidate the gains made in establishing price stability by achieving a third consecutive year of single digit inflation, with an end-year inflation target of seven per cent for 2008,” Dr Fundanga said. “Inflation, during the first quarter of 2008, is expected to continue to be in single digit levels.

This outlook is premised on single digit food inflation that has been sustained since April 2006, following the surplus 2005/2006 food harvest and 2006/2007 good harvest which was also reflected in the Food Reserve Agency (FRA) purchases of 396,485 metric tonnes of maize at the end of the crop purchase programme of September 30, 2007, representing 99.1 per cent of the targeted 400,000 metric tonnes.”

Dr Fundanga further said there were a number of challenges that needed to be considered next year such as a projected rise in petroleum products prices as well as higher electricity tariffs approved by the Energy Regulation Board.

And the country had its overall Balance of Payments (BoP) surplus narrowed to US$204.9 million from US $783.0 million recorded during the corresponding period in 2006.

The decline, according to the Central Bank, largely reflected the relatively poor performance in the current account that outweighed the improvements recorded in the capital and financial account.

“Preliminary data shows that Zambia continued to record favorable external sector performance resulting in an accumulation of reserves by the BoZ to US$1.1 billion in December 2007 from US $706 million as the end of December 2006,” Dr Fundanga said. On a year-to-date basis, Zambia’s trade surplus narrowed to US$589.4 million from US $1,041.3 million.

“The decline in the trade surplus was mainly explained by a sharp rise in merchandise imports which outweighed the increase in merchandise exports. Merchandise imports, at US $2,555.1 million, were 35.1 per cent higher than US$1,890.9 million recorded over the corresponding period in 2006,” Dr Fundanga said.

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At 8:54 AM , Blogger MrK said...

Zambia doesn't need special zones, where foreign investors can set up sweatshops and avoid paying taxes.

What it needs is a concrete and dogmatic approach to it's main economic sectors.

Tax the mines. Develop infrastructure. Develop agriculture. Lower taxes on all indigenous businesses and startups.

“Inflation, during the first quarter of 2008, is expected to continue to be in single digit levels.

And this has had no discernable economic effect on ordinary people. The reason: everything has been about making sure FDI feels comfortable and doesn't need to contribute to the infrastructure they use. There has been a shift in the tax burdon trom corporations to workers. That is the MMD legacy.

The IMF theories about low inflation and open borders is simply theory, and at that, a theory that has nothing to do with the Zambian economy.
In theory, low inflation is supposed to lead to low interest rates, which is supposed to drive the savings away from bank accounts and into the economy. In practice, there are very few savings; interest rates remain high, because there are other constraints on interest rates in Zambia that have little to do with inflation - lack of economic infrastructure (fixed addresses, known credit histories, etc.), lack of competition between banks.

In the end, Levy Mwanawasa must heed his own words - and 'invest in hard work'. There is no substitute to actually getting down with the domestic economic players and start helping them set up SMEs, farming areas and infrastructure.


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