FINANCE Minister Dr Bwalya Ng’andu says long term sustainability of Zambia’s economy will only be derived from increased local production of food and clothing.
During the Economics Association of Zambia (EAZ) annual gala dinner, Friday, Dr Ng’andu said the country’s failure to produce is what undermined the significant transformation of the economy.
“Our failure to produce undermines job creation and delays a significant transformation of the economy to the level that we are capable of achieving… additional tax measures announced attempt to give advantage to certain locally produced goods over imported goods. Yet another important measure that is on the cards for implementation requires that we begin the process of achieving a national paradigm shift, which will ultimately reduce our psychological over dependence on imported goods. What I think will ensure the long term sustainability of this economy is our capacity to produce more of what we eat and more of what we wear and not consume more of what others produce. Short of becoming a strong knowledge based economy of which we are some distance away from achieving, this economy cannot be sustained without developing agriculture and manufacturing as a foundation,” Dr Ng’andu said.
He said if most of the companies died due to the impact of the COVID-19 pandemic, the country would have little hope of reviving the economy.
“I want to explore measures which, if implemented, will give impetus to strong and sustainable growth in the medium to the long term. And I should also state here that I have understood resilience to mean developing adequate capacity to withstand the negative effects of the pandemic such that we are able to protect the vulnerable in our society and build a foundation for lasting recovery of the economy. At the very least, I think that what could set the stage for positive growth beyond the pandemic is how well and how many business entities survive the onslaught brought about by the restrictions in the movement of people and the subsequent standstill in economic activity. If most of the companies die, if they fail to transition, we have a problem but if we can preserve as many as we can going forward, then we have hope of reviving the economy,” Dr Ng’andu said.
He further said in response, government had decided to give practical support to businesses through the lowering of customs duties in the 2021 national budget, among others.
“Since our projections are that the negative impact of the pandemic will spill over into next year, the 2021 budget has also given practical support to business through the lowering of customs duties with the view of stimulating economic activity in agriculture and tourism,” said Dr Ngandu.
“Now in response and in order to prevent companies from collapsing under the weight of the COVID-19 induced challenges, early in the year, government implemented a combination of fiscal and monetary measures with expectations that they will give a lift to business and considerately assist to sustain them during 2020. These include waiving tax and interest on outstanding tax liabilities as a way of helping them to manage their liquidity, sustaining the customs duty and VAT commiserated items and issuing of liquidity through the issuance of the COVID-19 bond and the Bank of Zambia medium term refinancing facility.”
And Bank of Zambia Governor Christopher Mvunga said measures taken by the Central Bank were beginning to yield fruit as evidenced by the improved liquidity conditions and lower lending rates.
“Together, with supportive fiscal policy and initiatives by different stakeholders, we are beginning to see the positive effect of these measures on the real economy through improved liquidity conditions and relatively lower lending rates. Interest rates have come down broadly in line with the Policy Rate cuts and credit to the private sector has risen slightly while economic activity is showing signs of bouncing back despite pronounced downside risks,” Mvunga said.
He added that there was need for the Central Bank to strike a balance between price and financial system stability, and growth in order to address the current economic challenges.
“This requires that we, as Bank of Zambia, strike a right balance between price and financial system stability, and growth. The Bank remains committed to its mandate in contributing to the restoration of macroeconomic stability. We remain committed to overcoming the current challenges. The current developments in the economy, however, call for concerted efforts by all stakeholders to restore macroeconomic stability over the medium-term,” said Mvunga.