Is dependence on foreign aid here to stay?

PETER KAYULA | Wednesday November 10, 2010 00:00

But the good news is that concrete steps are being taken by these least developed nations, working together with the Brentwood Institutions - the International Monetary Fund (IMF) and the World Bank - to address inadequacies in economic resource management framework which have reduced returns from programmes implemented so far.

An IMF delegation was recently in Zambia reviewing the Extended Credit Facility (ECF) for the fifth time to help boost the country's economic growth, which now stands at 5.5 percent, and reduce poverty levels.  

In Kenya, a cabinet minister has revealed that the economy of the East African country, just recovering from a bloody post-election crisis of 2008, is on course to major recovery with a projected growth of 5.2 percent this year, a quantum leap from  a registered positive growth of 2.6 percent last year.  While in Angola, the government will in the next few days launch a complete overhaul of its public finance administration which includes corporate tax regime to ensure the most effective direction of all the country's financial resources.

The IMF team, which arrived in Zambia on September 3, held discussions with Bank of Zambia officials, Ministry of Finance and National Planning and other key stakeholders in  the financial and economic sectors, aimed at reviewing the Extended Credit  Facility of a country whose economic growth is presently driven by Chinese construction, energy and roads sectors because of the commencement of  large infrastructure projects. 

The ECF, formerly Poverty Reduction and Growth Facility, arrangement for Zambia was originally approved  in June 2008 and augmented in May 2009 by about US$252.6 million to an  amount equivalent to US$324.7 million. 

A June 2008 publication of Zambia's central bank - whose principal purpose is to formulate and implement monetary and supervisory policies that achieve and maintain financial system stability in the country - states that the first review of the Poverty Reduction and Growth Facility, perceived to be an essential ingredient of rapid and sustainable economic growth, was conducted during the second half of 2008 when another IMF team visited Zambia from September 17-26  and from December 2-10.  

The publication 'Monetary Policy Statement' says the basic purpose of the arrangement from the nation's point of view is to assist the Zambia Government in achieving the Fifth National Development Plan and boosting economic growth and raising the living standards of the people.

In a turn of fortune for Zambia, an increase in copper production has introduced a new novelty in productivity gains at the existing mines in the country linked by the growth of private interests in communication sectors with the recent sale of Zambia Telecommunications Company (Zamtel) and the liberalisation of the international telecommunications  gateway are slowly becoming integral features of the economic surge.  However, the untimely death  of president Levy Mwanawasa in August 2008 meant that a presidential by-election be held in October, further in the fourth quarter of the  year, a global financial crisis worsened by a precipitous fall in all  the major stock markets and commodity prices, severely disrupted the  implementation of the government Budget and meant that the first review  under the PRGF could not be implemented.

In addition, the arrangement on the PRGF framework for 2008 could not be concluded.  Despite these events, there was broad agreement on the outlook for the 2008 and a macro-economic framework for 2008-2011 was set up within the framework of the Filth National Development Plan (FNDP), which is focused on reducing poverty levels and  boosting economic growth and also takes into account the world financial  and economic developments.  

The broad macro-economic objectives for 2009 for Zambia included attaining the real GDP growth of at least  5.0 percent, achieving end-year inflation of no more than 10.0 per cent  and limiting domestic financing to 1.2 percent.  In Angola, a management consultant, Mc Kinsey and Company, has been hired to help advise on how to fix a  tax regime that has not been updated since the end of a civil war in 2002.  

Minister of State, Carlos Feijo, was recently quoted by a local news agency as saying the government  will launch a complete overhaul of its tax regime and other associated  structures to improve revenue collection, especially corporate tax.  

Kenya's transport minister  addressed a news conference after a meeting of National Economic and  Social Council in Nairobi where he revealed that the country's economy  will grow by 5.2 percent in 2010, a forecast that exceeds government's  previous estimate.  Kenya, which is East Africa's largest economy, sunk low after the bloody election in 2008, which cut growth to 1.6 percent down from 7 percent in 2007.  Existing economic theories, based on different value judgements and assumptions seem to offer alternative  approaches to economic development in Africa, but will lack of a macro-economic framework and dependence on foreign aid linger on forever? (Sila Press  Agency)