UPND chairman for economy and finance Dr Situmbeko Musokotwane says no positive change will come to Zambia’s economy if the country’s debt problem is not resolved.
And Dr Musokotwane has insisted that the Bank of Zambia (BoZ) needs to be led by professional and competent technocrats who can solve the country’s huge indebtedness.
Speaking when he featured on a live Programme on Diamond TV, Monday evening, Dr Musokotwane cautioned that leaving the central bank in the hands of incompetent personnel would unleash extraordinary high inflation levels.
His remarks follow President Edgar Lungu’s dismissal of BoZ governor Dr Denny Kalyalya last Saturday for unknown reasons.
“Zambia, today, is facing a lot of difficulties. The fundamental problem that is there is heavy indebtedness. Now, to get out of this problem, it is difficult to imagine Zambia getting out of this problem without the assistance of the most competent people, the most experienced people to lead these discussions with the IMF. And Denny Kalyalya has worked with the IMF (International Monetary Fund), he has worked with the World Bank and, of course, he has been in the Bank of Zambia for many years in different departments. Those are the kind of people we need to lead these discussions with the IMF in order to get us out of this debt problem. Without this debt problem being resolved, nothing positive about this economy will happen,” Dr Musokotwane said.
“Heading a central bank, you need not only the general leader, but also a professional leader. I will give you an example of a minister of justice and a chief justice. Anyone can be a minister of justice. We can have a history teacher as minister of justice, you can have an economist as a minister of justice, but there is no way you can have a history teacher or an economist being a chief justice because a chief justice, as head of the Judiciary, must be a leader, generally, but also a leader by profession. Similarly, the central bank needs leaders who understand the substance to the knowledge of the institutions and its duties, and Denny Kalyalya met those attributes,” he said.
Dr Musokotwane, a former finance minister in the MMD government, cautioned that the BoZ, if left in the hands of incompetent personnel, would be a dangerous institution that would unleash extraordinary high levels of inflation.
“Whether Mr [Christopher] Mvunga is going to be good or not I don’t know, but surely, the bird that is in your hand is better than many in the bush. Secondly, and this is very important, the central bank is a very dangerous institution, and left in the hands of incompetent people, it can unleash extraordinary high levels of inflation! We have heard where countries in the world have reached 100 per cent and even a million and above per cent. Such kind of inflation comes from incompetence in the central bank because there is no way you can have such kind of inflation unless the central bank is printing money to generate that kind of problem. And, therefore, if we put people who don’t have the knowledge, the experience, the competence, the impact is going to be huge!” Musokotwane warned.
He said South Africa’s Finance Minister Tito Mboweni was in order to comment about Dr Kalyalya’s dismissal because any economic decisions made here affected other countries.
“When you talk about what the South African Minister said, first of all, there is no perfect or absolute sovereignty because what you do in Zambia can affect any country. In particular, those people in South Africa will face a lot of problems from economic refugees coming from an individual country. So, they need to be concerned if they see one of the regional countries doing something that is risky because the next thing that is going to happen is that refugees from that country will go in South Africa and the South African people will say, ‘this government, why are you allowing these people to come here and take our jobs?’ Then the next thing is xenophobia,” he said.
And Dr Musokotwane, who is also Liuwa UPND member of parliament, said the only option to stabilise the economy was to enjoy a good relationship with the IMF.
“If we do not get into a relationship with the IMF now, two years from now, certain loans will be due. For the first one, we must find US $750 million to repay, and the other loans that we must repay. At that point, even now, the exchange rate will either keep on going up or our government may decide to default. However, that route is rarely not possible because you can’t refuse to pay the loan. So, the best option is to get into a good relationship with the Fund,” said Dr Musokotwane.
“What is important for us is to manage this debt. The most important thing is the amount of debt that Zambia is paying. This year, the Minister of Finance’s budget indicated that we must find US $1.5 billion. It comes in the country and then it goes out. So, foreign exchange is going out of the country to service these loans. Now, if foreign exchange is strictly channelled towards servicing these loans, how do you expect the exchange rate to be stable? So, only if we stabilise the exchange rate will we have stability.”
Government is grappling with a huge budget deficit of around K17.2 billion from K14.8 billion announced in April, largely attributed to a reduction in economic activity, together with elevated debt levels that will gobble K5.7 billion worth of debt servicing from Dr Bwalya Ng’andu’s K15.01 billion supplementary budget, representing around 38 per cent of the total budget.