Tuesday, November 02, 2010

Caritas recommends below 1% of GDP domestic borrowing

Caritas recommends below 1% of GDP domestic borrowing
By Fridah Zinyama
Tue 02 Nov. 2010, 03:59 CAT

CARITAS Zambia has advised the government to limit domestic borrowing to less than one per cent of Gross Domestic Product (GDP), saying such a move would help to empower citizens. The government wants to reduce domestic borrowing from 1.9 per cent to 1.4 per cent of GDP.

But Caritas Zambia noted that reducing domestic borrowing from 1.9 per cent (2010) to 1.4 per cent (2011) was good although the government needed to have political will to achieve this target.

“From past experience, the government has failed to do this as domestic borrowing has continued to increase,” Caritas Zambia stated.
The civil society organisation further noted that fiscal discipline was going to be necessary if government was to bring down domestic borrowing which increases the burden of domestic debt.

Caritas Zambia further stated that the government needed to reduce their appetite for domestic borrowing as it tended to crowd out private sector investment.

“Private investment is essential for ensuring that there is not only economic growth but also sustainable development and poverty reduction,” the organisation stated.

Caritas Zambia noted that the private sector helps to increase the productive capacity of an economy, creates employment, brings innovation and new technologies, and boosts income growth.

“This can only be achieved if government reduces its domestic borrowing not increasing it or maintaining it at its high levels,” stated Caritas Zambia. “A reduction in domestic borrowing by government may contribute considerably to the reduction in interest rates.”

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