Maravi

(NEWZIMBABWE) US dollar 'poses credit challenges': Ncube

US dollar 'poses credit challenges': Ncube
04/07/2011 00:00:00
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THE adoption of the US dollar as a base currency in Zimbabwe has been positive but also challenging, Mthuli Ncube, chief economist and vice-president of the African Development Bank (ADB) has said. Zimbabwe adopted the US dollar in 2009, shortly before the establishment of the establishment the coalition government.

But Ncube said on Monday morning that, while the dollarisation in Zimbabwe had been positive by stopping inflation "dead in its tracks" and improving growth, it had also increased the cost of doing business and reduced the availability of credit.

"It [dollarisation] has slowed down the availability of credit in the productive sector but, secondly, just made the cost of doing business very high," said Ncube who ran Barbican in Zimbabwe and was the Dean and Professor of Finance at Wits Business School before moving to the ADB.

"But I guess that's the pain that needs to be undertaken in order to get things straightened out there," he added.

The African Development Bank forecast Zimbabwe's growth at about 8% for 2011.

Meanwhile Ncube said the turmoil in North Africa has hit growth across in the region which is now forecast to reduce this year to 0.7 percent from 4.7 percent last.
Overall, Africa's growth is estimated at 3.7 percent in 2011, down from 4.9 percent last year.

Further south, Ncube said economies have been affected by a drop in money sent home by Africans from elsewhere on the continent who had been working in North Africa.
Niger, for example, had 200,000 citizens working in oil-rich Libya, according to ADB statistics.

Another knock has come from the reduction in sky-high Libyan investment as well as declining tourist numbers from that country, Ncube said.

Though the events of recent months in North Africa have clearly had an economic impact, Ncube said the political changes have not just been isolated to the region.

He noted that Senegal's longtime president has canceled a proposed legislative change that would have made it easier for his son to take charge of the west African nation.

"It was really the North Africa effect," Ncube said. "The youth will not tolerate any behavior they don't perceive as democratic."

Labels: AfDB, DOLLARISATION

posted by MrK @ 3:19 PM