TRYNESS TEMBO, Lusaka
ECONOMICS Association of Zambia (EAZ) has called on Government to take advantage of the current rise in copper price on the global market to establish a mineral stabilisation fund, as the outlook looks positive.
On Friday, copper on the London Metal Exchange was trading at US$6,811 a tonne.
A mineral stabilisation fund is basically a mechanism set up by a government or central bank to insulate the domestic economy in case of emergency by using revenue from commodities such as oil or copper.
EAZ national secretary Herryman Moono said the mineral stabilisation fund will be used to save revenue from the mining sector while copper prices are still high.
“On the overall fiscal policy side, it is important that Government considers setting up a ‘mineral stabilisation fund’ which would be a ‘savings pot’ for revenues from the mining sector when the copper prices are high.
“When the copper prices are high, you save into the fund such that when they fall, you can use these funds to stabilise your economy such as maintain a stable exchange rate and inflation,” Mr Moono said in response to a query last week.
He also said a rise in copper prices is good news for a commodity-driven country like Zambia, meaning that for every tonne sold, there will be more foreign currency.
Mr Moono said more foreign exchange will translate into an appreciation of the Kwacha when it makes imports cheaper, thereby translating into lower overall prices.
“The outlook looks positive. But this is the well-known copper price cycle, sooner or later, the prices will fall and it is what we do now, with the benefits accruing that will determine how responsive we will be when the prices are low,” he said.
M r M o o n o s a i d t h e pass-through effects of the appreciation resulting from the increase in copper prices results into lower inflation and it is anticipated to continue as a single digit.
Higher copper price also entails that Government could now benefit more in form of taxes on total mine revenue per tonne and is expected to create further impetus to more mining investments as well as increase the demands for inputs into the sector.