Caleb M Fundanga: Recent significant developments in the Zambian economy Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the 2006 Business and Financial Writers, Media Awards, Lusaka, 24 January 2007. *  *  *  • Heads of Diplomatic Missions, Permanent Secretaries and senior Government officials • Heads of Economic, Financial and Business organizations • Heads of Media Institutions • Economic, business and financial writers • The ACCA International Assembly Member and the Branch President • ACCA Country Manager • Distinguished invited guests, ladies and gentlemen I am delighted both as Governor of the Bank of Zambia and as patron of the business and financial writers forum, to officiate at the 5th annual business and financial writers awards ceremony for the second consecutive time. I must say I am always delighted to interact with you my colleagues from the media because we are both stakeholders in the provision and dissemination of financial and economic information to the public. The purpose of this annual event is to recognise outstanding journalism effort demonstrated by economic, financial and business writers from various media institutions. In this room tonight are different organizations represented with a commonality, that is, we all wish to have accurate, timely, informative, creative, relevant and in-depth information. Distinguished Ladies and Gentlemen, I am pleased as patron of the business and financial writer forum to continue working with you.
They consist, notably, of a reduction in governments’ debt financing needs, leading both to lower long-term interest rates (due to lower demand and declining risk premia) and to the release of revenues to finance more productive expenditure or growth-enhancing tax cuts. More leeway is then also created for the operation of automatic fiscal stabilizers in response to a cyclical downturn. In sum, fiscal consolidation is essential to secure public trust in the long-term sustainability of public finances, and to strengthen the foundations for sustained and durable growth. At the European level, fiscal consolidation should be in line with EU countries’ commitments under the Stability and Growth Pact, which provides the appropriate framework for the coordination of their fiscal policies. Given past experience of a slow and hesitant correction of excessive deficits, I see strong arguments for strengthening the implementation of the Stability and Growth Pact and reinforcing its rules for fiscal discipline. This could be complemented with enhanced national budgetary rules and procedures that are consistent with the EU fiscal framework. Monetary policy challenges Let me now turn to monetary policy and focus, in particular, on the response of the ECB to the crisis, and its current exit strategies. In response to the crisis and the ensuing subdued inflationary pressures, the Governing Council lowered its key interest rates to historically low levels. In particular, it reduced its main refinancing rate by 325 basis points to 1%, a level not seen in recent history in any of the euro area countries.