UPND Economics and Finance Committee Chairman Situmbeko Musokotwane says government’s promise that 2019 will be a year of economic prosperity should not be taken seriously because it is not supported by objective facts.
And Musokotwane has predicted that mines will subtract from the country’s overall economic performance, in view of disagreements over the new tax regime.
In a statement, Musokotwane said 2019 could hardly be expected to be a prosperous year because of the high risk of the Kwacha losing its value against other currencies, as the government budget indicated that debt servicing in 2019 would require about $1.5 billion.
Musokotwane, whilst wishing citizens a happy new year, highly doubted that 2019 would be a year of economic prosperity and called on Zambians to brace themselves for more economic hardships.
“The government is painting a rosy economic picture for 2019. This is extremely misleading for the average Zambian and UPND is not alone in being skeptical about a prosperous 2019. The international media is awash with reports and analyses about the impending economic crisis in Zambia, largely due to the country’s excessive national debt. Strangely, it is only in Zambia where there is no active discussion about this crisis. The rosy picture from the government is based on their projection for strong economic growth in 2019. In the Budget Speech, the following was said to be the contribution of mining to economic growth in 2019: ‘The mining sector will also continue to be important through its linkages with other sectors and the generation of foreign exchange’. Unfortunately, the envisaged role of the mining sector in the expected 2019 economic growth has turned out to be the opposite of what was desired,” Musokotwane stated.
“As things stand, the mining sector will actually subtract from the overall economic performance of the country, arising from the disagreements over new mine taxes which the government introduced in the 2019 Budget, some mining operations have been closed. New investments have been suspended and labour force has been reduced. The mining sector is in turmoil. The debt national problem is contributing to this problem. Our government is desperate for cash as it realises that it is unable to deliver services adequately and still pay off its debts. So, it finds itself forced to impose all sorts of taxes and levies to raise some cash. In the fury of doing so, the government has even overlooked the fact that the cow that brings milk must not be overtaxed to the point where its productivity is rendered negative. Contrary to the expectations of the government, these negative developments in mining will weigh towards reducing the 2019 GDP.”
Musokotwane stated that government’s promise that 2019 would be a year of economic prosperity was not supported by objective facts and should therefore not be taken seriously.
“Zambia should brace themselves for economic hardships. This is only logical given the fact that Zambia has once again been pushed into a debt crisis. The debt crisis is presently one of Zambia’s most urgent economic problems. Unfortunately, our government is choosing to pretend there is no crisis. This will not help because the first step to solving a problem is to acknowledge its existence. To this date there is no sign of any serious effort to address the national debt problem. Surprisingly, some ministries are even thinking of huge new additional borrowings. But UPND will take a different route once in government. After auditing all debts for authenticity, the plans that have been carefully designed during the past two years will be implemented so that the debt crisis is resolved swiftly. This will unlock the financial resources that are so desperately needed to hire teachers, medical staff, support free education up to tertiary level, support farmers, reintroduce liquidity in the economy and address many other genuine public concerns,” Musokotwane stated.
Meanwhile, Musokotwane observed that 2019 would be a bad year for the foreign exchange market, saying the government budget indicated that debt servicing would require about $1.5 billion.
“2019 can hardly be expected to be a prosperous year because of the very high risk of the Kwacha losing value against other currencies or what is called an exchange rate depreciation. This risk is very real. The likely cause once again is the high debt burden facing the country. Since 2014, Zambia has consistently been losing foreign exchange reserves which the Bank of Zambia uses to stabilize the exchange rate. Presently, the key driver for the loss of reserves is external debt servicing. In this regard, 2019 is a bad year for the foreign exchange market because the government budget indicated that debt service will require about $1.5 billion. This is likely to cause destabilizing effects on the exchange rate market given the fact that the national reserves are only $1.6 billion. In January 2016, reserves were at nearly $3 billion. So, within this short space of time, reserves have fallen by nearly half and this trend is likely to continue. This is a serious national crisis that is looming,” said Musokotwane.