Maravi

Dysfunctional economic growth

Dysfunctional economic growth
By Business Post Editor
Tue 20 July 2010, 08:10 CAT

There is no doubt things in this country are looking up and our people who are upbeat are understandably justified.

Today, Lusaka independent consultant Bob Sichinga is saying: “If we are to go by things that have taken place within the economy, seven per cent Gross Domestic Product growth can be achieved. After all, you had 6.2 per cent last year, but this year, growth copper production is going to be higher, and since the prices have gone up, you expect the proceeds to show the GDP that is higher than last year.”

Sichinga adds: “...The bumper harvest we achieved in maize output is also expected to impact positively on general economic performance for this year. These two factors alone – mining and agriculture will influence very positively the GDP growth.”

Sichinga was saying all these things in reaction to our finance minister Dr Situmbeko Musokotwane’s pessimistic letter to International Monetary Fund (IMF) managing director Dominique Strauss-Kahn, where he feared the country might not achieve its targeted economic growth rate of seven per cent for this year.

Dr Musokotwane said Treasury cut the country’s economic growth forecast for 2010 to 5.8 per cent from seven per cent due to the possibility of a sluggish global economic recovery. Indeed the global economy is far from being stable.

We know that even as the world makes steady recovery from the United States-induced financial crisis which ripped apart the integrated global economy, things are still very far from returning to normal. And just when we thought the global economy was past the worst, in came the Greek crisis.

The Greek crisis is a real threat. Granted, our economy has been on a growth trajectory fuelled by both a rebound in copper output and exports, mainly driven by private investment.

Successive positive yields in the agriculture sector, particularly maize output is also beginning to provide that critical component, not only to mitigate inflationary pressures but also our aggregate economic growth.
As we say all these things, we are drawn to the fact that the country has not prioritised its growth areas and targets.

There is indeed a dysfunctional economic pattern and this is a real threat to our economy going forward.

Right now the country is sitting on three million metric tonnes of maize from the last farming season. This is expected to contribute significantly to our country’s economic growth rate and we are justifiably patting our farmers on their backs.

But the question we pose before our economic managers is: after producing three million metric tonnes of maize, then what?

We have seen our economic managers moving like headless chickens over the management of this crop.

Our farmers have been begging for treasury to facilitate exports of surplus of 1.3 million tonnes of maize. But this is not happening at the moment.

And we feel this inertia alone stands a higher chance of reversing the feat achieved last farming season and at the same time throw into disarray the already fragile agriculture sector.

This is also likely to exacerbate high poverty levels in rural areas.

The other key source of growth – mining – is also in tatters. There is certainly no doubt that things are worst in the mining sector. Last year alone, the country only earned US $77 million from copper exports of about US $5 billion.

What economically-sensible explanation can our managers give us for the sector that accounts for 70 per cent of our foreign exchange earnings to contribute a paltry 9.7 per cent to our gross domestic product (GDP)?

This year, we are targeting to mine about 700, 000 metric tonnes of finished copper cathodes. But what will we have to show for this at the end of the year?

There is a definitely need to reverse this economically abnormal trend we are seeing in our economy if the much talked about GDP figures are going to make an impact on improving the lives of our people.

We need to correct the dynamics so as to help us plan for any eventualities that might emanate from external pressures or even our own making.

We also need to balance between higher oil prices and higher copper prices. We are saying this because we are hardest hit whenever fuel prices go beyond the roof on the international market. Yet, we earn the lowest when the trend is with copper. We therefore believe that this imbalance between our expenditure on oil and our little earnings from copper is one of the biggest threats facing our economy.

Labels: GDP, NEOLIBERALISM, ROBERT SICHINGA

posted by MrK @ 4:00 AM