Inadequate financial supervision and regulation, problems with macroeconomic management, and a general lack of transparency certainly contributed to the problems. Ladies and Gentlemen, even with the best economic management, small open economies remain vulnerable. They are like small rowboats on a wild and open sea. Although we may not be able to predict it, the chances of eventually being broadsided by a large wave are significant no matter how well the boat is steered. Though, to be sure, bad steering probably increases the chances of a disaster, and a leaky boat makes it inevitable, even on a relatively calm day. Ladies and Gentlemen, let’s turn to the role of monetary policy and central banks Price stability The interaction between financial markets, economic growth and monetary policy is by no means a new issue for central bankers. However, financial market developments have brought the question to the forefront of the policy debate. The continued integration and deepening of financial markets is a significant issue for policy-makers, and particularly for central bankers, since smoothly functioning and efficient financial markets are crucial in ensuring a smooth transmission of monetary impulses. The best contribution that monetary policy can make to the smooth functioning and integration of financial markets and to economic growth is to maintain steady medium-term price stability. Such a policy will be beneficial, as it will minimise the adverse effects of inflation and high inflation uncertainty. As we all know, price stability is beneficial in numerous ways.
However, these developments also project the improvements in regulatory and supervisory oversight which continues to be updated. Distinguished Ladies and Gentlemen, for Zambia the vision is to become a prosperous middle income country by the year 2030. In order for us to attain this vision, there is need to improve the financial infrastructure in Zambia. Since 2004, the Government has been implementing the Financial Sector Development Plan with the view to improve the functioning of financial markets and increase accessibility to financial services by a majority of Zambians. The second phase of the FSDP is currently underway after the initial five-year plan lapsed. We cannot deny that an improved financial infrastructure will result in efficient capital and money markets which in turn will attract domestic and foreign investment in the economy. Conclusion In conclusion Ladies and Gentlemen I would just want to emphasise that Zambia and many of our regional counterparts are small countries in need of investment. However, the high cost of capital has hampered the increase in investment, particularly among the SMEs which continue to face enormous financing challenges. Therefore provision of appropriate financing to this category of firms is likely to lead to higher investment opportunities and more efficient methods of production. In turn, this will translate into poverty alleviation due to employment creation.