Civil Society for Poverty Reduction (CSPR) executive director Patrick Nshindano says the drop in inflation to 7.4 per cent will not have any impact on the cost of living because a reduction in inflation does not always imply reduction in prices.
Speaking to News Diggers in an interview, Nshindano noted that the recent drop in inflation still had a huge impact on the poor and vulnerable people of Zambia despite being in line with the Medium Term Expenditure Framework (MTEF) period of between six and nine per cent, because they do not have any safeguard or copying mechanisms with regards to cover of loss income.
Nshindano insisted that it was impossible for Zambians to feel the impact of the percentage point reduction in inflation on Zambian tax payers because they were already overwhelmed with the many taxes required to pay.
“As CSPR, we note the decrease in inflation rate which has dropped to 7.4 per cent. This is good, because basically we are talking about the rate at which prices are increasing and this has a direct correlation to the cost of living. Having said that, one needs to know that this will not have in any way an impact on the cost of living as it is now. First and foremost, a reduction in inflation does not imply a reduction in prices. What it means is that the rate at which prices are going to increase is going to be lower as compared to the previous period. So we are still going to see an increase in prices. But beyond that, we have a structural problem as a country which we need to deal with. You will note that there was a period as a country that was between 2015 and 2016 where we had actually had it in terms of the impact of slowing down of the economy, which included the spike in inflation rate as higher as 22 per cent…”
“So that pushed the cost of living extremely high, but also whilst leaving most of people’s incomes stagnant, especially the poor and vulnerable as they did not catch up to the level of prices in terms of increase. So you have that spike but in addition you still continue to notice an increase in the level of inflation as stipulated. As much as it is within the Medium Term Expenditure Framework period of between six and nine per cent, this still has a huge impact especially on the poor and vulnerable. Firstly because they don’t have any safeguard or copying mechanisms with regards to cover of loss income.”
Nshindano regretted that the cost of living had continued to go up for most Zambian families.
“What you see with the high cost of living now, even when you look at the food basket which actually went beyond the K5,000 threshold in February, you will see that most people’s incomes have been eroded overtime and many poor households are struggling to be able to keep up in terms of household living. And this has subjected people to start rationing their income. What is happening is that instead of spending money to meet their basic needs because their income has not caught up with the cost of living, they now have to look at where to cut off. And mostly you find it’s on food items, other essentials such as education. Health and so on, which further compromises the quality of life for our people and push them further into poverty.”
“So it’s important from the government perspective to ensure that the cost of living of Zambia is managed very well, especially given that there are high inequality levels. So you have a very few people that have this wealth but the majority of Zambians cannot cope with the escalating prices that we are observing. So we need to focus first and foremost on the provision of basic needs such as food, health care, education and make it readily available to the Zambian citizen. Especially given that more citizens pay taxes so they need to see the benefit of those taxes through quality services. When you go to a hospital, you have to find those services readily available as opposed to what is happening now where you don’t find those services. What it implies is that with your eroded income, you are also unable to pay for those services which ideally, government should be able to provide,” Nshindano said.
Meanwhile, Nshindano called on government to ensure that it boosts the country’s productivity in order to normalise prices of essential commodities for the most vulnerable people in society.
“Secondly, we should ensure that we boost our productivity as a country. The cost of living is basically about prices, it’s an issue of supply and demand. Most of our commodities, both those that are locally produced and those that we import, most of the inputs are imported. So we need to ensure that we start enhancing our production base, especially in Agriculture and manufacturing so that our prices of essential commodities come down and are available and most affordable to the most vulnerable people in society so that they can also have a mechanism of serving. Once they develop the serving ability then they can then invest in other essential needs that they have, such as nutritional supplements in terms of diversified food and shelter and so on to make their life better and help them to move out of the poverty track. As it stands right now, what we see is a continuous erosion of people’s income and further pushing people into poverty,” said Nshindano.