ActionAid Zambia country director Nalucha Ziba says government urgently needs to implement a strong fiscal policy rather than continue with monetary policy interventions being implemented by the Bank of Zambia (BoZ) to stabilize the economy.
In a statement, Monday, Ziba stated that Zambia’s unsustainable debt levels, without a clear debt management strategy, were a thorn in the already struggling economy and a deterrent to investor confidence.
“Enough of the monetary intervention! It is time for fiscal interventions. Public debt is our biggest problem now. Unsustainable debt levels without a clear debt management strategy are a thorn in the already-struggling economy and deterrent to investor confidence. Government must be involved and take responsibility by actualizing austerity measures. Though there has been too much emphasis on austerity measures, it would be good to know how much has been saved as a result of implementing such measures. Government also needs to prioritize expenditure on investments with high and immediate returns to spur economic growth. Among the expenditures to be prioritized is an expenditure towards the energy sector than road infrastructure,” Ziba urged.
She expressed despair that contrary to the emphasis on minimizing debt contraction, government planned to borrow another US $2 billion for the construction of the Chipata-Serenje rail line.
“Additionally, high debt service demand has great bearing on our exchange rate, henceforth, slowing down in external debt contraction as well as postponing or cancelling of some pipeline loans to sustain public debt levels, as announced by the Minister of Finance (Dr Bwalya Ng’andu) during his 2020 budget speech, is way off for now. However, it is sad to note that contrary to the emphasis on minimizing debt contraction, government recently announced plans to borrow US $2 billion for the construction of the Chipata-Serenje Rail Line,” she stated.
But Ziba did, however, commend the Bank of Zambia (BoZ) for its monetary policy interventions in stabilizing the country’s economy.
Last Wednesday, BoZ governor Dr Denny Kalyalya announced the Monetary Policy Committee’s (MPC) decision to drastically hike the Monetary Policy Rate (MPR) by 125 basis points to 11.5 per cent, but stressed that it was a necessary move to arrest Zambia’s escalating inflation and prevent a full-blown economic implosion.
“The continued intervention by BoZ to stabilize the economy is an indication of a waning economy. It is worth noting that in long time now, BoZ has announced a quarterly back-to-back increment in the Monetary Policy Rate to curb inflation suggesting that monetary policy interventions are no longer helping our waning economy, hence, the need to go beyond the monetary policy. Right now, we can conclude that BoZ has done what every central bank would do to respond to our current economic woes. It is high time we addressed the causes of our waning economy and not the symptom (inflation),” stated Ziba.
“It is clear that our skyrocketing inflation is cost-induced due to among other reasons; (i) continued depreciation of the kwacha; Zambia being an import-dependent country; the continued depreciation of the kwacha means that we are paying more for the same imported goods earlier imported, henceforth, higher prices; (ii) the recent fuel pump price increase, coupled with the looming of more than 100 per cent electricity tariff increment; this has and/or will increase the cost of goods and services, hence inflation; (ii) declining productivity; our GDP is expected to grow at 2 per cent, the lowest ever in a decade; this is even worsening with current erratic power supply (we experience zero or negative economic growth), we are experiencing the worst ever load shedding possible, which is currently at 20 hours in a day.”