Maravi

Masaka advises Zambia against borrowing

Masaka advises Zambia against borrowing
Written by Chiwoyu Sinyangwe
Sunday, February 01, 2009 4:33:52 PM

POLICIES of free and self-regulated markets have failed to work,
visiting Japan International Co-operation Agency (JICA) senior advisor for Africa Masaka Msiyaji [sic, Masaka Miyaji - MrK] has observed.

And Masaka has advised Zambia against borrowing from international financial institutions to mitigate the impact of the current global economic crisis

Meanwhile, University of Zambia (UNZA) Development Studies lecturer Dr Fred Mutesa also said the government should not borrow for consumption purposes.

During a discussion forum organised by JICA and the Economics Association of Zambia (EAZ) in Lusaka last Friday, Masaka said timely and effective activity and people’s proactive mindsets were a prerequisite for economic development in the current environment of the global economic crisis.

Masaka, who is also former executive vice-president of Mitsubishi Motor Corporation in Japan, said there was need for countries to develop home-grown policies and programmes of overcoming the current economic challenges.

Zambia is among countries that have adopted free market policies, leaving the performance of all economic fundamentals to market forces.

“The current financial crisis, what I want to stress here is that government’s timely and effective activity and people’s proactive mindset are both prerequisite for economic development just like the two faces of the same economy…the government and the people,” Masaka said.

“If we are to analyse the current financial problems, and until the crisis, economists told us globalisation and deregulation of regulations, adopting of money markets or to say markets must be free…that we have to leave everything to the market. That kind of golden rule is no more valid. We must stick to our own way. We mustn’t follow Western ways particularly if you borrow the money from international institutions; many conditionalities come and the economy in the African countries is dropping down. I don’t recommend borrowing money from the international organisations as a country basis.”

Masaka also noted the need to take a protectionist approach towards the domestic economy and industries.

“I would rather recommend that you have to be more protectionist, but I don’t say protectionism. If I say protectionism, economists will be very much upset with me but when I say protectionist, it is a little bit different,” Masaka said.

“But you have to protect yourself as New Partnership for Africa’s Development (NEPAD) is established. NEPAD means self help or self responsibility by yourselves as an African continent and you have to do it by yourselves. You have SADC [Southern African Development Community] and other regional development groupings but Zambia is Zambia. Zambia has to develop by itself competing with other countries and friend of your neighbouring countries. Zambia has to grow. You have the potential.”

And Masaka said countries that borrowed in times of economic difficulties tended to come out worse after a crisis.

The government recently announced that it would increase its borrowing from international financial institutions, a move necessitated by the expected reduced government earnings this year following the current global economic crisis.

The current global economic difficulties are expected to have a negative effect on government revenue as the country's main foreign exchange earner – the copper mining sector – had been thrown in disarray following the continued collapse in international copper prices.

And Dr Mutesa supported Masaka’s calls, saying the conditionalities attached to loans offered by international financial institutions left countries with no policy space to choose options that were suitable for their development needs.

Dr Mutesa, who acknowledged that borrowing could be inevitable owing to the current unfavourable external economic environment, said there was need for the country to set a clear strategy on investing the borrowed funds to enhance productivity.

“…that is the major problem of borrowing from the international markets… what do you put the money to? Is it going to resuscitate the economy or bring dynamism I am afraid if we borrow in order to sustain consumption which include maintaining government administration, then we are headed in the wrong direction,” warned Dr Mutesa.

“If we borrowed to increases production, that would not be a major problem but also we can look at how we can reduce unnecessary expenditure and reallocate the saved resources to more productive sectors and industries.”

Labels: DEBT, EAZ, IMF, JICA, MASAKA MIYAJI, NEOLIBERALISM

posted by MrK @ 4:34 PM