Maravi

‘Govt faces challenge of external economic shocks’

‘Govt faces challenge of external economic shocks’
Written by Chiwoyu Sinyangwe and Nicholas Mwale
Saturday, November 22, 2008 11:44:14 PM

THE government of President Rupiah Banda faces even a greater challenge
in managing Zambia's economy due to increased external economic shocks, International Monetary Fund (IMF) resident representative Birgir Arnason has observed.

And Arnason said IMF stands ready to increase Zambia's access to its funding under the Poverty Reduction Gross Facility (PRGF) if the current global crisis results in substantial diminution of the country's foreign reserves.

In an interview, Arnason said there was need for the government to accelerate structural reforms that could boost growth in the medium term as a measure to help mitigate the impact of current external shocks while at the same time maintaining prudent macroeconomic stability.

Arnason said the IMF was hopeful that the country would continue on the path of sound macroeconomic policies as the regime of President Banda had repeatedly indicated intention to continue with the policies of late president Levy Mwanawasa which were anchored on stringent fiscal and prudent monetary policies that provided an environment for growth in the country.

He also said IMF was also happy with the appointment of Dr Situmbeko Musokotwane as the new Minister of Finance, whom he said the Fund had previously worked closely with over a long period both in his capacity as deputy governor of the Bank of Zambia (BoZ) and also as Secretary to the Treasury.

"There are a number of challenges the new government faces that are slightly different from those that the previous government encountered because the external environment is no longer as favourable as it used to be and the Mwanawasa government particularly in the last two years enjoyed exceptionally very good external circumstances," Anarson said. "It is very clear that the initial period of the Banda administration will face more challenging environment where copper prices will be lower, access to international finance maybe lower, global economy is much weaker than we had in the last five to ten years. But this does not spare any disaster for Zambia as the country has a lot of potential and an extended period to build on and going forward, it would be important to maintain Zambia as an attractive destination for investment and we encourage the government to maintain Zambia's attractiveness in that area."

Anarson said the new government should focus on structural areas such as management of the budget, ensuring increased revenue collection, making resources available and at the same time using government resources effectively.

"There is need for the government to accelerate implementation of the Private Sector Development Plan. Progress should also continue on the Financial Sector Development Plan and it is absolutely imperative to implement the strategy to alleviate the electricity shortage in the country," Anarson said.

And Anarson said IMF might consider increasing the scope under PRGF if the current unfavourable external situation as measured by international reserves were to deteriorate.

He also announced that an IMF mission coming to Zambia next month would continue discussions under the PRGF and also look at the preparation for next year's budget. Arnason added that the team, in consultation with the government, would "try to draw the clear picture of where the Zambian economy is headed" amidst the current financial crisis.

Labels: BIRGIR ARNASON, ECONOMY, IMF, NEOLIBERALISM, RECESSION

posted by MrK @ 11:46 PM