Party of National Unity (PNU) leader Highvie Hamududu says government should immediately take bold measures to arrest the falling kwacha.
And Hamududu has urged government to refinance the Zambia’s debt so as to ease the impact it has on the economy.
According to the Bank of Zambia (BoZ), the kwacha traded at an average of K15.60 to a dollar by close of business, Monday, after trading at an average K14.00 over a fortnight ago.
In an interview, Hamududu, who is also an economist, noted that measures currently being taken by government to address the depreciating currency were inadequate.
“So the dosage required to cure this depreciation is quite a big one and it requires boldness. Government must take steps, it’s not business as usual, it’s not these austerity measures which are not working, it’s not about increasing revenue because you cannot over tax the economy. So there must be approaches outside the traditional means, outside the current austerity measures, outside the current tax measures, right now the economy is already stressed so you can’t overtax the economy to close the fiscal space. So it requires bold measures and if these measures are not seen coming through, then we are concerned about the depreciation and how far it will go,” Hamududu said.
“The depreciation of a currency is an indicator of economic problems and government must delve into what is the underlying cause. The underlying cause is that the fundamentals macro-economic stability is compromised mainly by the continuous fiscal deficit that has led to government’s continuous borrowing. Now with a huge debt, there is a problem. So is there ways of resolving these things, yes, government must take good decisions but I must hasten to say that I think the measures that currently, the measures that government has undertaken, I think the measures are inadequate to arrest the depreciation.”
He said the depreciation of the Kwacha was an indicator of worsening macroeconomic fundamentals.
“The exchange rate cannot be sustainably addressed in isolation, because it is just an indicator of the general weakness in the economy. It calls for holistic economic reforms and not ‘hit and run’ approaches which the government is employing! In summary, the depreciation of the kwacha is a surest indicator of the worsening macroeconomic fundamentals in the country. Government cannot continue with the laxity of business as usual if the free fall of the Kwacha has to be arrested. The measures to stabilize the kwacha lies in a bold and holistic package meant to address the weakness in the overall economic fundamentals. So the strengthening of the current lies in economic recovery measures. These corrective measures must be underpinned by empirical evidence and not mere semantics,” he said.
“In summary, measures such as the following can do the needful at this critical time: Partial privatization of state owned enterprises, consigning some project debts from government books to the private sector among others. Government must give space for public private partnerships (PPPs) going forward in commercially viable infrastructure development to avoid future debts where possible, refinance the current foreign debt to ease debt payments. Government must also stimulate the economy by easing taxes on industry and business and craft a mining fiscal regime that will promote investments and exports in the mining sector. In addition, fiscal consolidation must be strictly adhered to in government to arrest unnecessary and avoidable government expenditure and cut wasteful expenditure, confront and fight corruption with the boldness it requires and further improve performance of the civil service by rooting out corruption, lethargy and deep-seated incompetence.”
And Hamududu called on government to refinance the Zambia’s debt.
“One of it is renegotiating our debt. What we call refinancing, we need a holistic refinancing of the debt meaning perhaps pay the debt over a long period because the pressure which is there right now is that they are paying out of the budget because as it stands now, 50 per cent of the budget goes to salaries and wages and 40 goes to debt. That is very unsustainable,” said Hamududu.