Maravi

Indrawati advises government to explain economic policies

Indrawati advises government to explain economic policies
By Chiwoyu Sinyangwe
Tue 27 Mar. 2012, 13:00 CAT

ZAMBIA'S internal preparations via clear and consistently explaining of domestic economic policies will be most important in getting best pricing for upcoming US$700 million bond, says World Bank managing director Mulyani Indrawati.

And Indrawati said the country needs to start watching the flagging global economy as it is expected to depress international price of copper - the country's economic lifeblood.

[Unless hyperinflation takes hold because of the hundreds of trillions of dollars in toxic assets, and the only thing worth anything will be real commodities like copper and food. She doesn't quite explain why the debt ridden global economy is flagging. - MrK]

With a few months to go before Zambia issues the US$700 million Eurobond, global ratings agency Fitch earlier this month downgraded Zambia's outlook to negative from stable, on account of its increasing concerns about the government's economic direction.

Indrawati said the most important decision to get the best market conditions for the bond was to do thorough internal preparations.

"It is not about the timing, about whether the market environment is good, but most importantly the preparations are from the internal side," Indrawati said in an interview.

Indrawati, who was in the country for two days last week, said bond buyers were focused not only on the current budget.

She said the government should explain the country's future economic direction and assure investors the money to be raised from the bond would be invested in sectors of the economy that would give security the country will be able to pay back the debt in future.

"And that the management of the economy is gonna be sound and good, and that your budget will stay in the sound footing, that the trend of your debt is gonna be stable, of even declining, your macro policy - fiscal and monetary policy working in a more coherent way or will need to be explained and put in your prospectus as well as the economic and budget governance needs to be strengthened," she said.

"In that case, when the government issues the bond, it will get the best price. That means they will get the interest rate which is reasonable."

And Indrawati warned that failure to expedite diversifying the country from mono-dependence (on copper) risked making the country vulnerable to external shocks as the outlook for the global economy continues to weaken.

"The last 10 years, the growth mainly boosted by commodity price and the commodity price was also driven by the global economy which is growing very strong that make the demand for commodity to be increasing, and that makes the price of copper and other commodities very high," said Indrawati.

"That may be is not going to continue because global economy is a little bit weakening with this crisis, and that is why watching on this commodity price is going to be very important for the government but at the same time focus need to be given for this area which is directly affecting the areas of the people."

Last week copper prices fell to a two-week low on Thursday, hit by concerns about the health of the global economy and by a softened demand outlook after manufacturing data showed a drop in new orders in both the euro zone and China.

London Metal Exchange (LME) three-month copper eked out a $25 gain to close at US $8,455 a tonne.

Labels: NEOLIBERALISM, SRI MULYANI INDRAWATI, World Bank

posted by MrK @ 8:17 PM