…World Bank says Eurobond markets face closure
ZAMBIA and other countries in the Sub-Saharan region should prudently manage their economies and avoid relying on Euro bond market to finance their deficits, says the World Bank.
World Bank senior country economist Gregory Smith said 2016 would be a difficult year for Zambia and countries in the region because the Euro bond market would be shut as a result of reduced confidence in the region by the international lenders.
This has come about due to low prices of raw material exports such as copper and oil, poor crop harvest, low production and power outages caused by severe drought which had affected hydro generation.
Mr Smith said this on Monday in Lusaka at a press briefing on the latest African economic update and the launch of the Africa’s Pulse – the World Bank’s twice-yearly analysis of economic trends and latest data in the Sub-Saharan region.
He said the cost of the debt of 11.8 percent in 2014 which was expected to raise in 2016 to 17 per cent against the average economic low growth of 3 percent for 2015 and 3.3 percent for 2016 GDP was not encouraging.
He said alternative ways should be found to the region’s deficits such as issuing local bonds and reducing government expenditure by tackling the wage bills, emoluments, minimizing government officers travel, broaden the tax base, improve and maintain fiscal sustainability.
Mr Smith also bemoaned the high lending interest rates because they harmed business although they were unavoidable when the country’s inflation was more than 20 percent and the government treasury bills more than 20 percent per cent per annum which consequently pushed up commercial bank’s lending interest rates to more than 34 percent per annum.
However, he welcomed the appreciation of the Kwacha to 9.8 percent to 1 US dollar caused by the reduction in imports as the result of the tight monetary policy being implemented by the Bank of Zambia which he said would be in force for a long time to come.
And the World Bank vice president for Africa Makhtar Diop in a press release authored in Washington and made available to the Daily Nation on Monday, said the Sub-Sahara pace of expansion for 2015 – 16 had recorded the lowest growth, only compared to the 2009 levels due to the low prices of exported raw materials.
The Africa’s Pulse report was launched via video conferencing from Washington.
The Africa’s Pulse report was produced twice yearly and provided analysis of economic trends and data for the region, according to the press release.
Mr Diop urged the region to take steps in addressing the drop in revenue from exports of their raw materials as well as drought conditions which presented risks to Africa’s growth prospects.
“As countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilization will be needed. With the trend of falling commodity prices particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people,” said Mr Diop.
Meanwhile, World Bank Africa acting chief economist, who is also the author of the Africa Pulse report, Punam Chuhan-Pole, saw African cities as the engine of growth in view of the falling commodity prices and encouraged Sub-Saharan governments to take appropriate effective city planning and coordination seriously and work towards reducing the cost of living of their city dwellers.
“To ensure growth and social development, cities need to become less costly for firms and more appealing to investors. They must also become kinder to residents, offering services and amenities. All of this will require reforming urban land markets and urban regulations and coordinating early infrastructure investment,” he said.