‘Global crunch makes African states see need for financial integration’
‘Global crunch makes African states see need for financial integration’Written by Edwin Mbulo in Livingstone
Friday, September 04, 2009 5:02:52 PM
AFRICAN Union (AU) commissioner for Economic Affairs, Dr Maxwell Mkwezalamba has said current global financial crisis has made African countries realise the need for urgent financial integration.
During a working session on formulation of a strategic framework and action plan for enhanced engagement of Sub-Saharan Africa with the World Bank, Dr Mkwezalamba said the AU was looking forward to the World Bank’s review of Africa’s financial access mobility rate.
“We at the AU are looking forward to a favourable conclusion by the World Bank as they table the financial access mobility rate either today (Tuesday) to enable low income countries access more loans in the light of the financial and economic crisis. The current financial and global crisis has made Africa realise the need to execrate the agreements for financial integration. I would like to thank the World Bank group too on the regional integration, there is a strong commitment to support Africa’s regional integration and AU is ready to work with the World Bank in this endeavour. We need to execrate this integration as a means of gaining financial independence for our continent,” he said.
Dr Mkwezalamba added that Africa needed to look at mobilising its own resources and called for all countries to support the formation of the Pan African Banking Institution.
And finance deputy minister Chileshe Kapwepwe said the World Bankís credibility had been undermined due to its excessive missions for feasibility studies which took too long.
“Regarding our experience with the World Bank, the rate of reaction of the global financial crisis has been lukewarm. It also lacks predictability in disbursement of resources. For instance a US$20 million budget support facility that was agreed in January 2009 has not yet been released citing an unachieved conditionality. This is despite the country being faced with huge revenue deficits in the budget caused by the crisis. The bank, unlike other IFIs [International Financial Institutions] has been reluctant to frontload assistance to deal with the effects of the crisis,” Kapwepwe said.
“We have also noted that the bank still has an exercise number of missions for feasibility studies on projects, which take too long. These are followed by lengthy projects designs and approvals. This practice has continued to during the crisis without reform. This has resulted in the undermining of the banks role as a global leader in the development financing.”
She added that the impact of the global economic crisis was significantly felt in foreign portfolio investment that declined significantly by 146 per cent at the end of 2008 as a net position from an increase of 52.5 per cent at the end of 2007.
Kapwepwe said this negatively impacted the local currency as the Zambian kwacha depreciated by 45.6 per cent between June 2008 and March 2009.
She further added that this was caused by the combined effects of withdrawal of portfolio investments and falling copper prices.
“This caused a serious fall in revenue from trade taxes which reduced by about 27 per cent below projection in the first half of 2009. Secondly, in an effort to smoothen the volatility that was being experienced with the currency, the central bank intervened in the market from time to time. This resulted in foreign reserves declining from 3.6 months of import cover recorded during the first half of 2008 to 2.8 months in the first quarter of 2009. The reserves have however shown recovery to about 3.3 months of the import cover at the end of the second quarter of 2009,” said Kapwepwe.
Labels: AU, MAXWELL MKWEZALAMBA, REGIONAL INTEGRATION
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