Economist, Mr Trevor Simumba
Economist, Mr Trevor Simumba

International Trade Consultant says the current economic problems facing Zambia today have not been caused by Chinese economic turmoil.

Mr Simumba charged that Zambia’s economic challenges have been brought about because of excessive borrowing and a huge budget deficit.

In an interview, Mr Simumba said the Chinese economic downturn will only add to the existing problems ravaging the Zambian economy.

“We should be very careful here, the current problems affecting Zambia have not been caused by the Chinese downturn, it is going to add to the factors affecting our economy. The main factors are that we have been running a huge budget deficit and too much borrowing,” Mr Simumba said.

Mr Simumba predicted that the impact on the Zambian economy from the Chinese downturn will be severe.

“The impact that is going to come as a result of the current Chinese downturn is going to be great because moist of our copper goes to China, so the demand for cooper will be low which will even lower the copper prices further on the international market and we will see a further Kwacha depreciation,” Mr Simumba said.

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29 COMMENTS

    • PF has destabilized the national ability to attract investments. Investment confidence is about perception and right now, a right thinking person cannot invest under PF. All these add up to the decline in the economy and value of the Kwacha.

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  1. Read South Africa news columnists and credible Trade Consultants like BLOOMBERG monitored by CNN who said this week August 21 2015,

    THE FINANCE MINISTER might have to revisit the assumptions he made in his first budget in February after the Rand weakened to breach the R13 mark against the Dollar for the first time in almost 14 (Fourteen) years, economists said. This is amid concerns about the tottering economy, afflicted by inflation and slowing growth in CHINA.

    THE RAND IS BEING HURT BY LOWER PRICES FOR RESOURCES THAT ACCOUNT FOR MORE THAN HALF OF EXPORTS, SLOWING GROWTH IN CHINA, WHICH IS THE TOP DESTINATION FOR SOUTH AFRICA’S MINERALS, AND THE PROSPECT OF A US FEDERAL RESERVE INTEREST RATE INCREASE. ITS CHINA, CHINA CHINA…. EVERYWHERE EVEN IN THE EU AND THE UNITED STATES…

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    • Luapula Premier, our kwacha has been on the decline since 2011!!! Apart from excessive borrowing, the demise of the kwacha is due to 1. Over dependency on imports that has resulted in poor Balance of Payments and 2. Lack of proper policy direction by the Govt that has eroded investor confidence 3. World currencies are under pressure now but will gain ground sooner than later while our kwacha has continued losing value the past 4 years. Let’s not bury our heads in the sand and start blaming the world for problems we Zambians are creating ourselves. In August, 2011, the kwacha was trading at K4.78 to $1 and K6.00 to $1 in August 2013. Currently it’s K8.60 to $1. What does the Rand or China have to do with our failure to manage our currency since 2011 sir? The fall of the kwacha is down to…

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  2. Exactly, Mr. Simumba. Zambians have been made to believe that the collapse of the kwacha is all down to global trends and China specifically. Yet our kwacha has been on the decline since 2011!!! Apart from excessive borrowing, the demise of the kwacha is due to 1. Over dependency on imports that has resulted in poor Balance of Payments and 2. Lack of proper policy direction by the Govt that has eroded investor confidence 3. World currencies are under pressure now but will gain ground sooner than later while our kwacha has continued losing value the past 4 years. Let’s not bury our heads in the sand and start blaming the world for problems we Zambians are creating ourselves. In August, 2011, the kwacha was trading at K4.78 to $1 and K6.00 to $1 in August 2013. Currently it’s K8.60 to $1…

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  3. …….Currently it’s K8.60 to $1. What does the Rand or China have to do with our failure to manage our currency since 2011 sir? The fall of the kwacha is down to PF. From the date PF came into power, the kwacha has been under pressure. Its as simple as that. I know PF cadres are already decided on defending Lungu no matter the amount of torture Zambians are going through.

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  4. If this man is an economist i get goose bumps wondering where he got his education from. 1 . Zambia begins to make repayments in 2025. so borrowing has not really started affecting the economy. The huge so called deficit is because of appetite to import. Its more of an attitude problem more than anything else. If we reduced imports and increased exports ,Chinese copper prices will not matter much. Secondly Zambia should start looking at finding new African markets for copper and should diversify. That way we wont be so affected by external forces

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    • You are really dull! Of course the borrowing has affected our economy. Just look at the current interest rates at Commercial banks.

      And then ask yourself why investment has dried up! When you have the brains to understand that you can come back and comment!

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  5. Economist, my foot! From which University? The fall has little to do with the borrowing, but all to with the too many imports and less exports. Of course China will affect Zambian Kwacha since they are major buyers for our copper. Lack of exports should not be blamed on PF. Previous regimes did not invest in manufacturing industries, hence the high importation of goods and continued exports of cheap raw materials. PF is now encouraging value addition, and if they succeed, the situation may start improving. But to expect Lungu to d everything in 7 months when you just eat, drink and condemn is lacking objectivity. Do something to help yourself and mother Zambia.

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    • Bro… these chaps supporting this fake economist are just haters… Zambia as a country must start producing for it’s own consumption, then move to next phase – exporting. Not this blame game.

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  6. The economic downturn being faced by this country is as a result of having an incompetent leadership of Lungu and team, period.

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  7. Wow…Economist really missed it. Everything has got everything to do with China, when China sneezes the rest will cough, and this fake economist has the balls to come on here and say otherwise.? UPND chaps blaming everything on PF, really now.? Only 4 major currencies are performing better against the dollar across the global, is this PFs problem.? Wake up and smell the coffee brethren. Eish

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  8. until the world realises that God is the creator of everythn,not even El,HH,or any economist wil help any currency frm crumbling.

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  9. The problem with UPND is that they they will rather keep quiet than admitting that they are wrong. I don’t blame the author of this article because thats how far his level of understanding can take him. lastly the richest man in Africa has just admitted on BBC that china has affected the economy of Africa. Thankyou for touching part of the truth that I know you used them to make you sound right.

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  10. Basimumba where can we get money to build roads, schools, and hospitals if not borrowing? Remember we sold all our companies and no region can wait to see development when Zambia starts exporting to have a balanced trade.

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    • @ Kayula,
      Zambia to borrow from who? why cant Zambia start lending? Thing BIG you Chi- PF moron who thinks that you can only develop through borrowing. levy built things without borrowing. PF was trying to imitate Levy but have crushed Zambia. Lungu nalungusha Zambia. So HH 2016.

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  11. Kwacha is not a major world currency. We can adopt the dollar in its current state but our economy will still not perform. All the macro benchmarks have collapsed.
    Economy also has to do with perception & confidence. All these are down. Look at our credit ratings.
    These are due to PF’s management style. Around 2008 the world’s economy was under recession but RB’s team led by Dr.Musokotwane stirred us out of that crisis. ECL’s ABC can’t play in this zone.
    Loadshedding, looming drug shortage, ECL’s lazyness, corruption has nothing to do with China. & these are issues of perception.

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  12. #Kashimba Chimbwili

    I will forgive you cos I don’t know how old you are. The Kwacha was at one time equal to a British Sterling, it was even stronger than the US$. The Rand was 2 to 1. Today the Rand is 13 to 1.

    Do u blame it all on Lungu?
    As long as our exports r less than the imports we shall always have this diarrhea. Let us attract investors through sound economic policies and making our country an attractive destination (infrastructure) for investors .
    Lungu is spot on.

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  13. If you cannot borrow then forget about any development. Ask any successful business man it is by borrowing you do business.
    If you have no roads in the country you can’t do any thing.
    Infrastructure is key to development , those cannot borrow they poor .
    The greatest borrowers in this world are the rich , the poor cannot borrow therefore they remain unconnected and isolated.
    Zambia is a country which needs to sale itself to the outside world in order to do business.
    Factories needs roads , farm products need roads, and the electronic infrastructures are needed in place .

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  14. Excessive borrowing is not only external but also domestic. PF increased statutory reserve ratio from 14% to 18% for commercial banks, monetary policy rate of (12.5% on paper) but practically 21%. (Government bond yield rate). The effect has been effectively crowding out the private/productive sector from accessing loans. Only govt has capacity to borrow at such expensive money & for what to pay the “evil” service, sorry civil service whose salaries were increased 100% & are still asking for more. (recurrent expenditure). These excessive salaries (not matched by production) drive consumption of imports e.g used cars from japan/fuel/shoprite or PickNPay imports which in turn puts pressure on the balance of payments. Even importation of co-mingled crude /fuel for which the market is…

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  15. CONTD: assured is a preserve for foreign firms for kick backs and huge forex profits repatriated monthly. Hence rapid depreciation of the Kwacha. As for the (external borrowing) Euro bonds what worthy improvements have been made at ZRL, other than putting aggregate on old sleepers, hydro power stations rehabs have resulted in loadshedding/never seen before; due to corrupt procurement of substandard equipment but blamed on rainfall). Even the much talked about township roads are substandard e.g. in Kabwe done by corrupt local contractor has no drainages & these roads will be washed away in the rainy season. What a waste! The Chinese have done slightly better on selected roads in Lusaka and C/B but they quote & are paid in Kwacha. This Kwacha is immediately offloaded/exchanged for forex…

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  16. CONTD: for repatriation to China. This puts further pressure on the exchange rate/too much kwacha chasing few dollars. PF has failed Period! Trevor is right!!! If you can comprehend these arguments/above then Go read a book on economics. Basic economics for that matter! Not even the Keynesian versus classical or monetarist stuff

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  17. U dull retards. OF COURSE borrowing leads to exchange rate instability. Govt borrows and bring in 100m dollars. They convert it and lets say they pay contractors. The contractor pays his worker. The worker goes and buys flat screen tv from shop. Shop owner uses his revenue to buy car parts. Car part owner buys Mosi. Brewer buys maize from peasant. Peasant buys fertiliser.
    The comtractor, shop owner, car part owner, brewery owner, peasant farmer all create demand for USD. Flat screen import, part import, brewery hops, label,malt etc all imported. Fertiliser imported. So bringing in 1usd creates what economists call the multiplier effect and this creates import demand for 4 usd.

    By same token when Kalyalya blocks 1zmk in circulation it blocks 4zmk in the economy as we are…

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  18. As for Munjalis comments above, let me remind him that the first Eurobonds came in at a rate of K5,50

    Now the rate is 8,50.

    So u need an extra K3 for each USD we borrowed. Already on first two bonds we need about K4billion (half a billion US$) more just for the exchange loss. This Govt collects taxes in Kwacha, not $. How do we generate $500m more from taxes just to cover our exchange loss, let alone the capital and annual interest.

    U get the point ?

    Thats why clever guys are pumping their cash abroad ?

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  19. Quest, you are right, the situation is compounded by lack of a strong base of manufacturing industries, we seems to be comfortable w&ith the current scenario, it’s business as usual! the ECL govt must pay attention, & really work extra harder to put in place a program to revamp manufacturing industries, for much of the imports, we are doomed if $ breaches K 10. If one day people wake up, and find price of bread and sugar has doubled, mubikepo no bunga @ K100+ we shall see protests. The price of crude oil is around $40/ barrel, we have developed a penchant for imports and export less, the govt should put in place a special task force to look into the economic melt down and find ways to get out of this. Let us not get carried away with by elections while paying a blind eye to the…

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  20. Contd… economy. Also last discipline pa ma ministers kwati tabaletina kofye! the contaminated oil saga has died quietly, we have not quantified the losses, suffered by govt. It’s business as usual. Releasing of convicted former ministers on compassionate grounds is sending wrong signals to the ministers, as most of those perceived to be corrupt are now living in a comfort zone. People must never be taken for granted, I liked the Dr Musokotwane handled the economy when we were faced with economic woes at that time. Why not consult such eminent people like Dr Magande, Fundanga etc pantu if this is not handled properly kaya kaya.

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  21. Please am sure this economist did some statistics to get he economist paper, where can’t he do some simple analysis and regression so that using empirical data he can then come and comment on which variable has really affected the current woes from all he has mentioned than just coming here with data even my daughter in grade one can say.

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