By Letuka Chafotsa
MASERU — Lesotho needs to shift focus to policies that will develop society rather than only those aimed at celebrating figures of economic growth, the Minister of Finance Dr Leketekete Ketso said this week.
Speaking at National Economic Conference held at a local hotel, Ketso said economic growth should translate into tangible indicators like improved standard of living through increased income.
He said economic growth should “create jobs and opportunities for poor people to support their families and build more stable futures,” Ketso said.
Ketso said many developing countries face particular challenges that make it difficult for them to stimulate and sustain economic growth.
“These challenges include weak institutions, high unemployment, poor infrastructure, lack of access to financial services and unsuitable laws and regulations,” Ketso said.
Speaking at same event, the Minister of Development Planning Dr Moeketsi Majoro said: “Recently emerging markets by the acronym MINT (Mexico, Indonesia, Nigeria and Turkey) give a glimmer of hope to African countries since within MINT there is an African state Nigeria.”
This year global economic experts had robustly shown trust in investing in MINT countries.
“First it was the Brics (Brazil, Russia, India, China and South Africa). Then for a while the Civets (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) were in vogue. Now the MINT are the ones to watch,” Majoro said.
Majoro said MINT are emerging market pacesetters so Lesotho should be in a position to take advance of the African country within MINT through developing its textile products.
He added: “The chances are you probably heard that MINT is no longer just a peppermint sweet, it is now also an investment acronym which in the next decade or two could prove extremely profitable for investors”.
Meanwhile, the global recovery is strengthening but much work remains to be done, according to the IMF’s updated World Economic Outlook report, released earlier this week.
The IMF expects global growth to increase from three percent in 2013 to 3.7 percent in 2014 (previously 3.6 percent).
Advanced economies are expected to pick up from 1.3 percent in 2013 to 2.2 percent in 2014 while growth in emerging and developing economies is set to climb from four percent to five percent.
“The basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened,” says IMF chief economist Olivier Blanchard.
“The drag from fiscal consolidation is diminishing. The financial system is slowly healing. Uncertainty is decreasing.” However, it is still “a weak and uneven recovery”, he warns.
A key global challenge will be adjusting to US monetary policy normalisation.
Developing economies with weak macroeconomic frameworks like Lesotho should be most affected and will require stronger domestic policies to reduce this risk.
While developing economies face tighter financial conditions as a result, the IMF thinks this will be countered by faster developed world growth.
The IMF has cut SA’s 2014 growth outlook by 0,1 percent to 2.8 percent.
In emerging markets and developing economies, recent developments highlight the need to manage the risks of potential capital flow reversals.
Economies with domestic weaknesses and partly related external current account deficits appear particularly exposed.
Exchange rates should be allowed to depreciate in response to deteriorating external funding conditions.
When there are constraints on exchange rate adjustment — because of balance sheet mismatches and other financial fragilities or large pass-through to inflation because of monetary policy frameworks that lack transparency or consistency in their implementation — policymakers might need to consider a combination of tightening macroeconomic policies and stronger regulatory and supervisory policy efforts.
In China, the recent rebound highlights that investment remains the key driver in growth dynamics.
More progress is required on rebalancing domestic demand from investment to consumption to effectively contain the risks to growth and financial stability from overinvestment.