Green party president Peter Sinkamba says the fanatical monetary and currency tools have created a crisis at the Bank of Zambia and are rapidly shrinking the country’s economy, as more people resolve to keep money in their homes.
In his statement to the media today, Sinkamba stated that as Finance Minister Felix Mutati presents the 2018 national budget this Friday, he should consider an overhaul on the policies, saying a sharp shrink on the economy had direct consequences on the tools relied upon by the Central Bank.
“We the Greens are extremely alarmed that fanatical monetary and currency tools have triggered a crisis in the banking sector and subsequently shrinking the economy rapidly. We urge Minister of Finance Felix Mutati to rethink these policies and consider an overhaul as he presents the 2018 budget, because they are driving the country into an economic crisis. This is evident from the statistics which show that the economy has shrunk from about US$28billion in 2013 to US$19billion in 2017. The rapid and sharp shrink is a direct consequence of fanatical monetary and currency tools relied upon by Bank of Zambia since 2013 to stabilise the Kwacha. If the PF Government is serious about growing the economy, and reducing the budget deficit, and reversing the banking sector crisis, there is no two ways about it but to overhaul the policy tools,” Sinkamba stated.
“The worst of all is the extortionate monetary policy of revised Item Value Limits on Cheque and Electronic Transfer Policy which limits cheque transactions to K25,000, electronic transfers to K75,000 and direct debits to K500,000. People have now resorted to keeping their money in homes instead of banking it. This and other monetary and currency measures have triggered a crisis in the banking sector. Day-in-day-out, banks are closing outlets; banking halls at Arcades, Levy Mall, and elsewhere in the country are becoming emptier. Banks are literary surviving on salaried loans and treasury bills. They are declining project financing for SMEs because loan defaults are becoming endemic as contractors and suppliers are not paid on time. Foreclosures and repossessions are at their peak. If this is not a banking sector crisis, then what is it?”
He charged that government had failed to find an investor to take over the closed Inter-Market bank due to financial institutions surviving on hand-to-mouth kind of banking.
“Put simply, it is nauseating to see banks surviving on hand-to-mouth when Bank of Zambia has reduced statutory liquid rations. It is no wonder that one year on, Government has failed to find an investor to take-over the closed Inter-market Bank. What is happening currently in the banking sector is actually a harbinger of an economic crisis. Anywhere in the world, the barometer for a healthy economy is the thriving banking sector. It is for this reason that banks, elsewhere in the world, are bailed out through stimulus packages when they are performing badly to stimulate the economy,” Sinkamba stated.
He however questioned how the country was going to service the US$17 billion external debt when the economy was on free-fall mode.
“The road ahead is extremely bleak. First, as an export-dependent country, at the moment, the export portfolio is doing badly. Largely, this is because of incoherent policies in mining sector which have harmed this traditional major foreign exchange earner. Second, the foreign debt is ballooning by the day. According to the finance minister, the external debt has reached US$17 billion from US$7 billion four years ago. The nation heavily relies on foreign inflows to balance our trade and to repay its loans. How then do we manage to service the external debt when, in dollar terms, when our economy is on free-fall mode? How do we diversify economy if the SME sector has been rendered dysfunctional?” asked Sinkamba.