Maravi

Govt borrowing should help stimulate economy

Govt borrowing should help stimulate economy
By Fridah Zinyama
Sat 24 Oct. 2009, 04:00 CAT

ECONOMICS Association of Zambia (EAZ) has said government’s increased borrowing from the domestic market is justified provided that funds go into the development of infrastructure and other key sectors.

The private sector has expressed concern at government’s intended increased borrowing from the domestic market as the situation threatens to push up interest rates. In an interview, EAZ president Dr Mwilola Imakando said government’s intended borrowing from the domestic market should help to stimulate the country’s economy.

“I know that many players from the private sector have expressed concern over government’s decision, and they will be justified in their concern if government decides to spend the money on consumption and not investing into developmental projects,” he said.

Dr Imakando said government should also consider spending the borrowed funds on reducing the cost of doing business for the private sector.

“If government spends money in key sectors, there is going to be money flowing in the economy and the private sector will be able to participate positively,” said Dr Imakando.

In the 2010 national budget, finance minister Situmbeko Musokotwane revealed that government intended to limit domestic borrowing to 2.0 per cent of gross domestic product (GDP).

Dr Musokotwane said government’s increased borrowing from the domestic market was as a result of considerable reduction in its revenue base due to the effects of the global financial crisis.

But the Zambia Association of Manufacturers has said government’s borrowing from the local market would make it difficult for the industry to access funds from commercial banks, considering the high cost of doing business in the country.

ZAM outgoing president Dev Babbar said local manufacturers would find ways to survive the current economic hardships being faced in the country.

Labels: DOMESTIC DEBT

posted by MrK @ 9:57 AM