Editor's Comment

Target lower inflation to create jobs

ZAMBIA’S economy has come a long way to reach where it currently stands after going through various reforms, structural adjustment programmes coupled with liberalisation and privatisation of the economy.
The initial stages of these programmes were painful and hard to swallow but now the fruits are beginning to bear and these manifest themselves through increased direct investments, job creation and a sustained economic growth of about six percent for almost a decade.
But despite this growth bottlenecks still remain, including lack of faster rate of expansion for small and medium-scale entrepreneurs due to various factors such as lack of access to finance and the prohibitive high cost of borrowing.
Yesterday, vice-president Guy Scott lamented  the high interest rates banks and other financial service providers are charging  as being too high and that this has the potential to negatively impact businesses.
We agree with this observation and urge the Bank of Zambia to look at various ways in which it can mitigate the high interest rates because lower interest rates have potential to enhance companies’ expansion, thus leading to job creation.
Dr Scott said the private sector should not ignore the impact high interest rates have on the country’s economy and job creation.
High interest rates have a negative impact on any economy because investments in equipment to improve productivity is stifled.
Businesses and farmers benefit from lower interest rates as it encourages them to make large equipment purchases due to the low cost of borrowing, creating a situation where output and productivity increases.
It is therefore important that monetary authorities, particularly the central bank, keep a keen eye on interest rates and inflation because these two have a bearing on employment.
The deliberate move by the PF government to concentrate more on employment and low interest than previous administrations is a move in the right direction as low inflation has a bearing on the rate of job creation.
However, domestic borrowing through treasury bills and bonds remain relatively high with the six-month treasury bill rate at about 17 percent, therefore, bank lending rates have remained high although there are other factors at play.
It is therefore, a welcome move that the budget is targeting to reduce Government’s domestic borrowing and further reduce inflation this year and in next year’s budget.
Reducing inflation and the budget deficit will ultimately reduce the cost of business and make available more financial resources for businessmen and farmers for investment which will in turn create more jobs.
This will go a long way in helping to reduce poverty and at the same time be in line with the government’s pledge to create more jobs and put more money in people’s pockets.

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