(LUSAKATIMES) Economic slow down unavoidable

Economic slow down unavoidable
November 25, 2008

Economic experts have said the on going economic slow down in Zambia, which has seen the local currency depreciating against major convertible currencies, is a phenomenon induced by global market forces and will need economic strategising to mitigate.

Zambia Association of Manufacturers (ZAM) chairman, Dev Babbar and economic consultant Oliver Saasa in separate interviews pointed to the global economic developments as the main influences on the local economy currently.

Professor Saasa said that the depreciation of the Kwacha against major convertible currencies was as a result of low copper and other metal prices on the world metals market.

Prof Saasa said much of the Kwacha’s depreciation was as a result of the global financial crisis, which had deprived financiers money to invest in other economies.

He said what could be done for the Zambian economy was to maintain high production levels.

Prof Saasa urged the manufacturing sector to stabilise production costs because this was the only way that the sector could manage to keep afloat in the current difficult times.

He said there was need for all stakeholders to present a calm investment picture of Zambia through both speech and actions.

Prof Saasa projected that the economy may not manage to attain the targeted seven per cent growth rate under the current circumstances.

A slump in the price of copper arising from dampened demand saw foreign exchange inflows from the export of the metal dwindle in the last six months or so.

The mining sector had experienced a boom in the last seven years, largely because of soaring metal prices riding on a huge demand for metals by economies like China and India.

Since April how ever, metal prices have been in free fall on the LME, with the price of copper falling from the record high of US$8,900 then to below $3,500 as at the end of last week.

The slow down in the economy has seen prices of commodities including the staple maize meal rise in the last two months.

Mr Babbar retaliated that the Kwacha’s decline was a function of global economic issues whose effects on an economy like Zambia’s, which is still in its development stages, cannot be avoided.

Zambia had adopted an open market economy, which is susceptible to any development in the global economy.

Economics Association of Zambia(EAZ) president, Mwilola Imakando said the current fall in the value of the Kwacha was based purely on economic factors and had nothing to do with local politics or any other non economic factors.

“The local economy is responding to market forces following developments in the global economy, any other view on this is mistaken.” Dr Imakando said.

The EAZ president said that at the moment, Zambia was experiencing a low inflow of foreign currency owing to reduced copper earnings because of the metal price slump.

Consequently, this had exerted much pressure on the local currency as per the supply and demand rule.

He said it was likely that demand for metals would still be dampened in the near future meaning that the foreign exchange inflow would yet still be affected.

“Zambia has no control over the pricing of metals on the international market, the strategy should be to diversify the economy and promote high value crops including cotton and tobacco to enhance export earnings,” Dr Imakando said.

In this way, the fall in foreign exchange inflows would be compensated to a certain extent.

Adapted from Times of Zambia
Categories: Economy