UPND leader Hakainde Hichilema has written to the International Monetary Fund’s country office in Lusaka, presenting a multi-faceted approach and view on how he believes the Zambian economy can be resuscitated.
And Hichilema has told the IMF that the Zambian government’s huge expenditure on the emergency electricity imports is unsustainable and will deny the country the opportunity to invest in solar and other renewable sources that can quickly be put in place.
Meanwhile, Hichilema has warned the Fund that Zambia’s economy is at serious risk of a full implosion if the party’s recommendations are ignored.
In a letter addressed to the Office of the Resident Representative at the IMF’s Lusaka office, Hichilema disputed the government’s narrative that Zambia’s economic crisis was largely climate change-driven, but was attributed to the PF’s poor fiscal management, exacerbated by huge debt and reckless public spending.
“While these hardships are claimed to stem from external factors like climate change, we would like to set the record straight that the economic malaise is largely due to poor fiscal management, which has emerged from the weak political and economic leadership since 2012. Specifically, the fiscal irresponsibility of excessive expenditures and a huge appetite for non-concessional financing is quite evident. It has pushed the debt stock to unsustainable levels and seen a rapid accumulation of domestic arrears that have negatively impacted private activity, thus hampering the growth of the economy,” Hichilema wrote in his letter seen by Diggers! Monday.
In a comprehensive, detailed proposal of how a UPND administration would quickly resuscitate Zambia’s struggling economy, dubbed: “Our Proposal of the Blueprint to fix the Zambian economy” Hichilema pointed out eight separate measures, such as a drastic cut in public spending that would arrest the country’s economic decline.
“Zambia desperately needs to rein in its public spending by strictly realigning expenditures away from wasteful spending items to ramp up pro-poor support and arrears clearance to suppliers, to ease the liquidity crunch in the economy. Among other things, this requires bold measures, such as: cutting back on irrational capital expenditure on urban roads, creation of new districts, the proposed national airline and so on; a consolidation of ministries; and the elimination of non-essential international and domestic travel by senior government officials,” Hichilema added.
On the country’s massive public debt, Hichilema proposed that a UPND government would urgently design a credible debt sustainability strategy.
“…Urgently formulate and implement a credible debt sustainability strategy that will lower the fiscal deficit from the current (2020) target of 5.5 per cent of GDP to around 3.4 per cent of GDP. That will simultaneously improve credibility in terms of achieving the deficit targets. The deviations between the fiscal deficit on a cash basis and on a commitment basis must be minimized,” he stated, adding that the opposition party would also soon unleash its so-called “Jobs Agenda for Zambia (JAZ),” detailing how the country’s unemployed will be incorporated into the labour market.
He pledged that his administration would promptly table all relevant pieces of legislation to tackle wasteful public spending.
“…Promptly table the Bills for the Planning and Budgeting Act and the revised Loans and Guarantees Act and Public Procurement Act, to address weaknesses in public financial management and procurement. These pieces of legislation are critical for preventing and punitively correcting vices such as corruption, rent-seeking, public sector wastefulness and so on, which have all become endemic in the public sector lately,” he observed.
And Hichilema argued that government’s huge expenditure on the emergency electricity imports is unsustainable and would deny the country the opportunity to invest in solar and other renewable sources that could be quickly put in place.
“On energy, funds spent on short-term importation of power are unsustainable, and deny the country the opportunity to invest in solar and other renewable sources that could be quickly put in place. Hence alongside investments in renewables, we call for a restructuring and reform of the legal, governance, managerial and technical operational arrangements for Zesco, to allow for commercial independence, efficiency and restoration of its financial standing as well as to open up the energy market more broadly,” he wrote.
“This must be underpinned by a well-managed review of the tariff structure, to establish one that will attract investments while protecting Zambian families, particularly low-income households from catastrophic electricity expenditures.”
Meanwhile, Hichilema warned the Fund that Zambia’s economy remained at serious risk of a full implosion if the party’s recommendations were ignored.
He cited Zambia’s huge public debt servicing commitments as being the fundamental challenge strangling the country’s economy.
“The large debt service obligations, limited financing options and the declining economic activity highlight the urgency with which the measures proposed above must be undertaken. Referencing the IMF as a credible international financial authority, we estimate the debt stock to be in excess of 90 per cent of GDP by the end of 2019 and economic growth to be no more than two per cent in the same year (2019). Any delay in implementing the necessary upfront fiscal adjustments and changing the status quo will further weaken the macroeconomic fundamentals, and further undermine confidence in the economy, with concomitant effects on capital flows, depreciation and financial conditions. Should our advice fall on deaf ears, the country risks instability and a full-on economic collapse under the weight of unrelenting fiscal mismanagement and poor economic governance,” cautioned Hichilema, who, however, encouraged Zambians not to give up hope, but continue persevering and look to the near future as “help was on the way.”