Saturday, July 30, 2011
By Kabanda Chulu in Kitwe
Fri 29 July 2011, 14:00 CAT
DISPARITIES between the rich and poor will still exist despite the reclassification of Zambia a lower middle-income country, says central bank governor Caleb Fundanga. And Dr Fundanga has said Zambia will not fall into indebtedness because government borrowing is within the stipulated limit.
Commenting on the implications of the country’s ascension to lower middle-income status, Dr Fundanga said the reclassification would enhance investor confidence and further boost the investment climate thereby creating jobs and wealth for people.
“In terms of financing, under the new arrangement, it should be noted that government will be able to access more non concessional financing. This is in contrast with the previous status whereby Zambia could only access limited concessional financing which attracted very low interest rates and payable after a long time,” Dr Fundanga said.
“Despite the positive reclassification, it should be noted that the disparity between the rich and the poor will always be there and does exist even in developed countries, so the challenge for government is to implement policies that will redistribute wealth so that inequality is reduced.”
He said the reduction in donor aid should encourage the government and all Zambians to work hard to accelerate economic growth needed for economic development.
“Following reclassification, donors will not give out when you can earn it on your own but we should not feel ashamed that donors will reduce aid, in fact it has been an anomaly that a rich-copper producing country at 47 years after independence is receiving alms and aid,” Dr Fundanga said.
He said many countries, including the bigger economies like the US and China, did not have enough resources to develop their economies.
“Many governments resort to borrowing, which is good if it is for productive purposes but for consumption it is bad hence we need to create activities that will generate income from the borrowed money,” said Dr Fundanga, who is also ZRA board vice chairman. “But right now government is within the limit and soon we shall have increased revenue when all mining companies enter the full tax-paying brackets thus government borrowing will reduce correspondingly.”