ECONOMIST Trevor Hambayi says it will be difficult to revive the economy in 2021 due to focus being on elections.
Commenting on President Edgar Lungu’s pronouncement that the economy would be revived in 2021 once COVID-19 is contained, Hambayi said in an interview that political pronouncements should be separated from the reality of economic performance.
He said going into an election year, government would be pre-occupied with winning elections and would ignore economic fundamentals.
“If you look at 2021, you have an additional challenge to this, this is our election [year]. When we go into elections, the government in power has no concern about economic fundamentals, they are more resigned to winning their elections. So what you will see in 2021 is that our Kwacha will continue to depreciate because we have not put anything in place to try and support this. This is a very big challenge that we have,” Hambayi said.
“We must separate political pronouncements and the reality of the performance of the economy. The President pronouncing that the economy is going to rebound in 2021 has no economic fundamentals to support it. There are key factors that would speak to the economy rebounding but you must remember that our economic recession started from 2015; it has been a gradual decline with economic performance to now. All the factors that have contributed to that decline to 2015 are still in place.”
He said Zambia had more problems than just COVID-19.
“There is nothing that we have done that is going to change the economic performance. Where we are now is actually worse off than we were in 2015. The first aspect to our economy being depressed is our national debt. The county’s debt is unsustainable and we now have a liability of $1.5 billion per year to pay in debt servicing. The second one is fiscal expenditure, we are spending more money than we are generating, we have a budget deficit,” he said.
“The third one is that we have a power deficit, we have continued to have a power deficit for the last two years and that has not been resolved at all. The fourth one is the dispute with the mines [such] that we are not generating than we need to be generating from the mines. The fifth is obviously the liquidity constraint in the market. All those factors need to come into play for the economy to start to pick and then you can speak about COVID-19.”
Hambayi insisted that there were no economic fundamentals indicating that the economy would boom in 2021.
“What you see with our economy is that since 2015, our economic performance has continued deteriorating. Every macroeconomic indicator you look at in 2015 to now 2020 has been deteriorating. Whether you are looking at GDP growth which has dropped from five percent to 1.9 percent as we have seen 2019, 2020 we are in a recession of minus five percent GDP growth. If we are looking at our debt to GDP ratio, we have seen that it has been increasing 27 per cent to now over 90 per cent which is above the threshold for viable debt management,” said Hambayi.
“If we look at our interest rates, we look at our exchange rate, we look at the inflation rate, everything has been deteriorating and there is nothing that seems to be changing. We just want to be politicizing what we are saying but we are not putting the underlined fundamentals to support this. Our exchange rate in terms of having to change it requires a fundamental base of export that we are generating more export than imports.”