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The Global Financial Crisis – How Does It Affect Zambia?

Currently there have been arguments for and against as to whether the global financial crisis will affect the Zambian economy.

Some economists feel that Zambia is part of the global village, and as such she will definitely feel the effects, while others say the country is immune to the happenings in the global economy.

However, it is prudent to plan ahead so that we can put measures in place to safeguard the Zambian economy.

But how are the economic players in the country reacting to the global crisis? Take for instance the reaction of the mining sector. Since the global crisis has affected the copper prices, some sectors in the mining industry reacted by reducing the labor force and suspending their expansion projects.

The same situation has been experienced in the tourism industry. It is a known fact that many tourists who come to see Livingstone and the Victoria Falls are from countries where the impact of the global crisis has firstly been felt such as Europe, Asia and US. Hence many tourism businesses have already started feeling the impact in Livingstone.

Tourism Council of Zambia Chairman Jacob Sikazwe echoed the same sentiments that the current economic slow down will have terrible effects on Zambia’s tourism industry.

The tourism sector has contributed significantly to the GDP of the country. For example, Sun Hotels in Livingstone is currently one of the largest employers.

How should the government react to the prospects of the mass retrenchments? According to economists Chibamba Kanyama, the government should revise duties in strategic and sensitive industries if the anticipated recession threatens jobs.

On 7th November 2008 the Zambia Association of Chambers Of Commerce and Industry chief executive officer Justin Chisulo also confirmed that the financial crisis and falling copper prices is having an effect on the strengthening of the Zambia kwacha.

Mr. Chisulo said Zambia was receiving less inflows of US Dollars due to the volatile economic environment, a scenario which was putting pressure on the local currency.

According to Mr. Chisulo, the current weakening of the kwacha had nothing to do with uncertainties in the economy due to the political situation, which has since stabilized after the elections.

He explained that the falling copper prices and the global credit crunch had an influence on the direction of the kwacha.

“The outlook and future of the Zambian Kwacha depends on the continued global financial crisis and falling copper prices”, Mr. Chisulo said.

Mean while, Prof Chirwa said Zambia would not be spared by the current trend were investors were cutting down on the investment. “The reason being that investors need money to invest in projects. If that money is not there from the banks, and financial institutions, then no investment will be made. I am afraid this will be the tendency around the world and Zambia is not immune,” Prof Chirwa said.



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