Economics Association of Zambia president Dr Lubinda Haabazoka says the Kwacha will continue depreciating against major convertibles because of the numerous negative sentiments from the public on social media.

And Haabazoka says the introduction of sales tax is progressive.

Speaking during the 2019 budget analysis meeting, Friday, Haabazoka urged Zambians to be careful what they posted on social media saying it could affect the performance of the Kwacha.

“I would like to emphasise that Zambia’s economic growth or Zambia’s economic performance cannot be seen or the factors that affect Zambia’s economic performance are not the same as in 2000. Zambia has issued a Euro-bond, and when bonds are trading on the market, nobody does fundamental analyst, nobody will calculate all those ratios for you. People look for noise, people look for information. So, you should be aware that if the bond performs very badly because of a story or a tweet, that is going to affect the performance of the Zambian kwacha because that investor that wanted to bring in forex is going to be disturbed, is going to have a wait and see approach. And that forex is not going to land in Zambia and the currency will suffer,” Haabazoka said.

“For example, it’s not a crisis but what is happening to the Kwacha it coincided with tweets and Bank of Zambia is here they know that they have been doing open market operations meaning they have the forex, but the Kwacha is still losing value because people that wanted to bring in money are scared of what we are discussing. People that are in Zambia, that had Kwacha investments including some of the people that are here are already running to buy forex. This is what I wanted to share with you as an individual, those that want to learn more about the influence of noise should learn more about efficient market hypothesis and technical analysts. Kwacha will continue to fall, fall and fall because there are a lot of negative sentiments from Zambians that influence the urgency with which potential investors would invest the country. The develop a wait and see approach and as long as we continue doing that, Kwacha will be affected.”

Haabazoka however, expressed shock over government decision to spend K22 billion in debt servicing.

“It’s quite alarming that about K22 billion is allocated towards debt servicing. But like I said, these interactions should be aware to the fact that in economics, you have a lot of ideas. And since the PS, honourable Minister is here, I would like to say that certain debts can actually be converted into PPPs. I believe that there is a place for government in business and there is also no place for government in businesses. For example, there is a lot of, please don’t attack me, I know that in Zambia there are a lot of sentiments, I do not know why government should own for example an airport terminal,” he said.

“The Zambian government can still own the runway, the airport but I think if that debt is to move on the balance sheet, we increase the debt, but we can look at how the financiers can be convinced, or other parties can be convinced to take such projects into PPP. I know there are rumours to say, but this is what I am telling you from an economic perspective. There are a lot of projects, hydro-electric stations, which I think ZESCO should not own because I think ZESCO should employ more people. ZESCO will spend money renovating such, if we have Maamba as an example of an independent of ZESCO and providing energy, so government should look at such projects that can be converted from debt to remove them off balance sheet through PPPs.”

And Habazoka says the introduction of sales tax is progressive.

“Coming to the budget, you know as economists, especially if you reach the level of permanent head damage, you know that there is always a solution to a problem. And the greatest characteristic of an economist should be such that you never think you are going in danger any time. So, coming back to austerity measures and the national budget, I think I would like to say that colleagues from the Ministry of Finance are even more revolutionary than I can be because I never thought that they can bring everybody on board to participate and fund government expenditure or government operations. When you look at the budget that was announced today (Friday) for 2019, I think it reflects the economic conditions both globally and domestic. And when you look at the current situation where we are, I think we are where we are because for over 20 years we neglected infrastructure development in this country,” he said.

“I would like to disagree with my colleagues who said that sales tax is a very bad thing. You know Zambia is a country that is developing and there are a lot of loopholes in which people can run away from paying taxes. And I am telling you if ask people from the Zambia Revenue Authority, you are going to know that there are people that even have no address, physical address as companies but every month they will be very keen to go and claim VAT refund. I think that moving from VAT to sales tax is going to ensure that government saves over a billion US Dollars in VAT refunds from. From the mining industry alone, the Zambia government is going to $700 million, those figures are official figures, and everyone can check. In terms of mine policy, I didn’t expect any movement in that area because you know colleagues are very strong, but I think those that loved windfall tax, will know that indirectly windfall tax has come, and it kicks on when metal prices, copper prices are above $7500.”