Former Economics Association of Zambia (EAZ) president Dr Chrisphin Mphuka says Zambia is not likely to benefit from the government’s austerity measures because there is lack of political will.
Last week, Bank of Zambia (BoZ) governor Dr Denny Kalyalya observed that if austerity measures were working, Zambia would not have the kind of economic challenges currently being faced.
Commenting on this observation, Dr Mphuka concurred, saying that government’s pronouncements were not being fulfilled because there was no political commitment.
He said government was still incurring huge expenditure on account of continuous travel that Zambian taxpayers had to pay for despite repeated announcements of austerity measures.
“I think the problem has been to renege on certain commitments; you make certain pronouncements, but you don’t fulfill because there is no political commitment and at the moment, that is the defining element. We are talking of austerity, but we are still seeing a lot of movements; it is an open secret. Clearly, there are certain things, which we can say government is doing and not responding to austerity measures. For example, you are having certain areas of the economy, which are being starved in terms of resources, but you are having other areas, which keep going above what is programmed and I think that is what’s causing the problem. But again, the argument is are we doing this in all areas of government? So, there are some areas that are really above the others, living as though austerity is not there and that is the problem,” Dr Mphuka told News Diggers! in an interview.
“Well, I think the problem is that you must have budget credibility before you talk of fiscal consolidation. And I would agree with the Bank governor (Dr Kalyalya); the last three years we have set targets and we have missed those targets in terms of (achieving targeted) fiscal deficits, which clearly shows they there are slippages somewhere. We commit, but we really don’t go with the commitments and this is the reason some of us feel strongly that it would be nice to have a programme with the International Monetary Fund (IMF) so that you have a supervisory process that helps your process of being credible in implementing the budget. Maybe this year, we will manage the fiscal target, but I doubt! I doubt clearly going by what we have seen over the years.”
He added that government needed to critically analyze whether it was capable of sticking to its austerity measures agenda, especially ahead of the 2020 national budget.
“We need really need to come back and say: ‘how can we really stick to this austerity agenda?’ In the short-run, it is very painful, but I think in the long-run, it brings back macro-economy stability. And that is what we want to achieve: low inflation and also bringing liquidity in the economy; there is no liquidity because of the same over-borrowing,” he said.
And Dr Mphuka, an UNZA economics lecturer, said fiscal consolidation remained difficult to achieve in Zambia because public expenditure usually outweighed revenue mobilization.
“And why it has been difficult to achieve fiscal consolidation in Zambia? For example, if you looked at how the budget was designed, the aim was to achieve fiscal consolidation using the revenue side rather than the expenditure side. You can’t tax your way out of this fiscal situation! It is almost impossible! So, there must be a commitment to be seen to cut on the side of expenditure and that is one thing that has been seen to be coming in this year’s budget. We hope that in the next (2020) budget, we will see commitment on the side of expenditure rather than achieving fiscal consolidation through raising revenue. There is a limit to which you can raise revenue because when it comes to compliance, it becomes an issue. And this year, the issue of the Sales Tax, which was projected to be one of the mechanisms that would have been used to ensure that government raises more money, that has not come out. Then it directly means less revenue, and less revenue implies that you have a bigger fiscal deficit,” said Dr Mphuka.