In July 2019, Standard Bank Group said “the appointment of Bwalya Ng’andu as Finance Minister was welcome but the bank feared that this development could not be able to change the status quo for Zambia. This is the third Finance Minister in three years. The bank was however not sure if the appointment of the new Finance Minister would change Zambia’s fiscal status because for the past three years, the Ministry of Finance had been delivering the same message to Cabinet but nothing seemed to have changed. Could the change of Finance Minister change the advice that the President and the rest of the Cabinet had been receiving from the Ministry of Finance? Judging from the increasingly strident warnings that the Bank of Zambia’s Monetary Policy Committee has been making regarding the risks to macroeconomic stability posed by fiscal policy, it seems reasonable to believe that he would continue to communicate that message.” And by April 2020, this remains true. President Edgar Lungu and his Cabinet are not heeding any advice on their reckless journey that has created a man-made economic mess. This clearly explains the predicament Bwalya Ng’andu faces.
The Minister of Finance, in a statement on 22nd, April 2020 on “further” measures aimed at mitigating the impact of Covid-19 on the Zambian economy, thanks to his lumbering staff, took him over 2,500 words to say little of any meaningful substance. The Minister says that “in arriving at these measures, government engaged various stakeholders, including the business community, as well as bi-lateral partners, on the possible interventions to mitigate the negative impact of COVID-19”. From the documentation that this newspaper has seen, business associations have presented to the Ministry their comprehensive and constructive suggestions, but there has been no meaningful dialogue; the Ministry simply received the presentations, and that’s all. To date, only one business friendly measure has been announced – the waiver of tax penalties and interest. The suspension of duty and VAT for COVID-19 imports is for the benefit of government, not business. We are surprised that there were no cost-cutting measures; there was no announcement for government to refrain from suspicious fuel and fertilizer procurements, nor refraining from spending over US$400 million on defence during peace time and severe economic and health crisis. There was repetition of measures taken by the Central Bank. The word “further” means “additional to what already exists or has already taken place”. Repetition is not “further” measures by any stretch of imagination.
Let us break down what else the Minister of Finance said: “In our projections, we have assumed that the peak period for impact of the Coronavirus on revenues is April and May. If we further assume that the pandemic will be quenched by August 2020, we project that the negative impact on revenue will continue until December 2020.” This is nothing but dysfunctional thinking by his staff. On what basis are these projections being made? From inquires we have made and from gleaning the WHO website and the Zambia National Public Health Institute (www.znphi.co.zm), there is not in existence any modelling on Zambia specific COVID-19 projections on infections or deaths, let alone anything on peaks or flattening the curve.
The ZNPHI itself indicates that Zambia is ill-prepared for testing and in general COVID-19 preparedness. The ZNPHI Situational Report No. 30 of 17th April 2020 firstly has no prediction on COVID-19 peaks, or when it could be “quenched”, as the Minister puts it. The same ZNPHI report indicates how inadequately prepared Zambia is. The optimism seems misplaced. And therefore, to imply that the biggest decline in revenue will be in March and April, with presumed recovery thereafter, is rather preposterous.
On the Bank of Zambia (BOZ) targeted medium term refinancing facility, the BOZ is asking for 110 per cent collateral, then telling the banks to lend Small and Medium Enterprises for 12 per cent. No bank worth its salt will do that. It’s too high a risk for low return. Basically, the BoZ is telling banks they can charge five per cent more for the money than they pay BoZ. The question is whether that is sufficient to cover the risk, bank costs and their profit margin. In an economy as unstable as Zambia is today, it is highly unlikely.
This BoZ proposal has not been “tested” and there is no proof of concept to show it will work. No Commercial Bank has been seen to be promoting this facility. So far, it remains a desktop theoretical concept. The Minister rightly points out that the COVID-19 induced economic impact will have reduced revenue for government. But what has the Minister done to cushion this impact in the tourism, construction, manufacturing and all other sectors? When asked whether the government will re-look at the labour laws during this COVID-19 crisis, all he could say was that he would have to refer the matter to the Ministry of Labour. This clearly shows that the government is not managing the crisis in a coordinated manner.
On IMF, the Minister says “with respect to an economic programme, Zambia has just completed a two-week virtual mission with the IMF at which an assessment of the macroeconomic and fiscal situation was undertaken. This follows Zambia’s request for an economic programme with the IMF which was made at the end of 2019. On the basis of the Mission’s outcome, Zambia will now discuss with the fund on an appropriate macroeconomic framework that may lead to a programme”. This is the big elephant in the room that does not seem to go away. It is one thing to make a request, and there have been many non-virtual, but face to face consultations with the IMF in the past five years of the PF government. Making a request is one thing, but meeting the basic requirements is another. The IMF package works like a mortgage. At every stage, there are certain benchmarks that have to be met.
Let’s conclude by pointing out that the PF government’s main challenge is transparency. Government has to disclose how much they have borrowed, for what purposes and the terms and conditions of the loans. Government has to cut its expenditure and show self-discipline. Buying, for example, an executive Gulfstream-650 jet for President Lungu in time of debt crisis so that he can stretch his legs, as Kalaba said, is frivolous expenditure for a government that is bankrupt and debt-ridden.
In December 2019, the illustrious Alexander Chikwanda, in an article he published entitled “Patriotism is an inescapable moral imperative for all citizens”, said “with pain, I admit that the IMF’s concerns about borrowings are plausible. The decline in our reserves is rather worrying so let us as all responsible citizens urge our government to take the tough medicine, delay could affect the economy’s resilience. A program with the IMF gets a diversity of investors on board. This is the ugly reality of our top-sided world”. This was an “open” publication on advising the PF government, like what the former Ministers of Finance and Trade and Industry and former Bank of Zambia governor wrote in an open letter to President Lungu and Dr Bwalya Ng’andu. So we remain here, there and everywhere and going nowhere!