Saturday, July 24, 2010

Zambia can achieve growth forecast, observes Sichinga

Zambia can achieve growth forecast, observes Sichinga
By Chiwoyu Sinyangwe
Tue 20 July 2010, 12:10 CAT

ZAMBIA can this year achieve its economic growth forecast of seven per cent despite finance minister Dr Situmbeko Musokotwane having lowered it to 5.8 per cent, Lusaka independent consultant Bob Sichinga has observed.

Dr Musokotwane, in his recent Letter of Intent to International Monetary Fund (IMF) managing director Dominique Strauss-Kahn, said the country’s economic growth rate had been cut due to the possibility of a sluggish global economic recovery.

He said growth in the country’s economy would be driven mainly by new investments in mining and power generation.

“As agricultural output reverts to trend levels, real GDP growth is expected to fall marginally to 5.8 per cent in 2010 before rising to 6 per cent thereafter,” stated Dr Musokotwane.

But in an interview last week, Sichinga said the current economic dynamics in the country favoured a higher economic growth rate.

“If we are to go by things that have taken place within the economy, seven per cent can be achieved,” Sichinga said.

“After all you had 6.2 per cent last year, but this year, 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. We have had good crop this year and which we will export.

These two factors alone – mining and agriculture – will influence very positively the GDP growth...So, I do not share that pessimism with him. The only area is ‘how do you account for the proceeds that are coming from those areas of export for example?’”

He said although the Euro zone’s economic problems, fuelled by the Greek sovereign debt crisis, might pose a challenge to the country’s economic performance, Zambia’s real threat lay in the price of oil rising.

“The other thing that we should worry about is the cost of oil which are major inputs in our economy,” he said. “If that price of oil goes up, that is going to create problems for us. But at the moment, at 74 per barrel, it is certainly higher than last year but not significantly higher.”

Sichinga regretted that Zambia’s economic growth does not match with development as most key industries are not contributing to the country’s development.

“So, if what you earn from copper is not being recycled in Zambia but elsewhere, where do you expect development to come from? Where the money is being recycled?” Sichinga asked.

“We must examine where the growth is coming from, and so far in the policies the Minister of Finance talks about, he never discloses. There is a dysfunctional…there is no matching between what you are showing in GDP with what is happening. The fact that there is GDP growth does not mean there is development because the money is not coming back here to develop the roads.”

Sichinga said there was need to review the methodology used to evaluate key economic statistics to achieve maximum accuracy.

“Even the figure they gave us of 6.2 per cent in the year where there was these challenges was not an accurate accounting of those activities,” said Sichinga.

“We need to review the way we account for GDP growth including inflation. We need to review all factors that are taken into account. The statistics are not accurate and even the minister knows that as well.”

And Secretary to the treasury Likolo Ndalamei said despite the lower economic growth forecast outlined in the June-dated letter to the IMF, growth was likely to come in above the new forecast.

“We revised the target downwards because of the global economic crisis but agriculture and mining have performed very well and we expect to grow the economy beyond 5.8 per cent,” said Ndalamei.

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