Soaring prices of oil worry Magande

Soaring prices of oil worry Magande
By Joan Chirwa
Wednesday June 11, 2008 [04:00]

FINANCE and national planning minister Ng’andu Magande has said the escalating oil prices on international markets are posing a serious threat to Zambia’s growth prospects. And Vice-President Rupiah Banda said the government was taking long and short-term measures to the energy crisis, realising the sector’s importance in overall economic growth.

Meanwhile, Vice-President Banda said the government would not allow any exports of food this year as commodity prices continue to rise on the local and global markets.

Addressing delegates at the Euromoney Zambia Investment Conference, which ends today in Lusaka, Magande said prices of oil, which hit US $135 per barrel on Monday, would have terrible effects on Zambia’s economy.

“The current high oil prices on the international market pose a very serious threat to growth prospects of the country,” Magande said. “Yesterday (Monday), the price of oil was above US $135 per barrel and analysts have forecast that the price of the commodity could hit above US $200 by the end of the year. This will have a terrible effect on economies like ours as oil is a critical factor to production.”

As a result of the current high oil prices, Zambia’s inflation rate last month retreated to double digit after maintaining a single-digit level for a while. Local economists have warned that Zambia’s targeted inflation rate of five per cent at the end of this year might not be achieved owing to the current market trends, such as escalating oil prices, which were largely behind worldwide commodity pricing. And the Economic Report on Africa 2008 released late last month warned that oil importing countries like Zambia would feel the pinch of soaring prices of oil, as the economies strive to achieve the targeted growth rates.

Earlier, Vice-President Banda said the inadequate energy infrastructure had forced the government to come up with both short and long-term measures in addressing the problems.

“In the short term, government is supporting efforts to have power plants rehabilitated while in the long run, we are working towards finding partners so that new power generating plants can be constructed,” Vice-President Banda said. “The energy issue is a formidable challenge to government and we are working towards addressing this challenge.”

Vice-President Banda further said increasing cost of food commodities had posed a serious challenge to the government.
“We have food shortages where we had floods but by and large, Zambia does not have any food crisis,” Vice-President Banda said. “As a result of this situation, the country will not export any maize this year like we have done in the past.”

This is the first time in history that Euromoney Conferences is holding a high level meeting of business experts, local and international business institutions in Zambia. Key issues lined up for the two-day conference include Zambia’s political and economic stability, private sector potential, micro-financing for small and medium entrepreneurs (SMEs), mining and manufacturing among others.