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Tuesday, September 22, 2020

President Lungu directs Stakeholders to cut down on imports to save the Kwacha Slide

Headlines President Lungu directs Stakeholders to cut down on imports to save the...

 

Mr Amos Chanda
Mr Amos Chanda

President Edgar Lunga has directed all government institutions and the private sector to reduce foreign currency related expenditures in order to save the Kwacha from further sliding. In a statement released to the media by his Special Assistant for Press and public relations Mr Amos Chanda, the President urged all entrepreneurs small, medium and large to increase production of various goods that can be exported to reduce the country’s trade deficits.

Below is the full statement

PRESIDENT MOVES TO GUIDE INTERVENTION MEASURES ON KWACHA, ENERGY SITUATION

LUSAKA (Friday, September 4, 2015)- Following the deterioration of the currency and energy situation in the country in recent months, His Excellency Mr. Edgar Chagwa Lungu, President of the Republic of Zambia has intervened to guide monetary and fiscal policy measures designed to stabilize the markets.

1.Developments in the foreign exchange market

The continued difficulties in the global economy and the unprecedented strengthening of the US Dollar has sent all currencies including our national currency, the Kwacha on a downward spin.

The Kwacha depreciation has in the recent past accelerated largely due to the trade imbalances that we are experiencing because the imports are in excess of the exports which have reduced both in volume and value. This is a major function of low commodity price levels globally. Total exports for the first half of 2015 are 26.9% lower than that recorded in the same period in 2014.

The President has therefore directed the ministries involved in economic management particularly the Ministry of Finance working together with the Bank of Zambia to closely monitor the situation and keep him constantly and frequently appraised.

The President wishes to urge all entrepreneurs small, medium and large to increase production of various goods that can be exported to reduce the trade deficits.

There should be a bold drive to increase the levels of production and processing of a wide range of things that are within the country’s reach to reduce on unnecessary imports.
A depreciating Kwacha to unreasonable levels has severe cost implications for a country like Zambia, which imports a lot of its requirements, some of which are excessive. The low Kwacha also compounds our external debt servicing.

The President has directed all government institutions to rationalize and minimize in all areas that engender foreign exchange costs. The President also enjoins the private sector to reduce foreign currency related expenditures. He makes a strong appeal to the Commercial Banks to be proactive and on the alert for the many leakages and other illicit out flows without being prodded or policed by the Bank of Zambia.

The President notes that following global economic developments over the past two weeks that have had adverse effects on many emerging and developing economies, including Zambia, the Treasury and the central bank have been closely monitoring developments to assess the resultant impact on the domestic economy and the local currency.

Growth in the global economy remains modest and uneven. According to the July 2015 International Monetary Fund World Economic Outlook update, growth for 2015 is projected at 3.3%, 0.2 percentage points lower than in the April outlook.

Growth in emerging markets and developing economies is expected to slow down to 4.2% compared with the outturn of 4.6% in 2014. China’s growth slowed down to 6.8% year-on-year in the first half of 2015 from 7.4% recorded in 2014.

In Sub-Saharan Africa, growth is projected to slow to 4.4% in 2015 compared with 5.0% in 2014, largely reflecting the drop in commodity prices that has led to deterioration in external sector performance, particularly for commodity exporters like Zambia.

Zambia remains vulnerable to developments in the global economy. In particular, the balance of payments position has deteriorated reflecting a widening current account deficit. Both traditional and non-traditional exports have declined significantly this year while imports have declined at a slower pace. As a result, the Kwacha has been on a depreciating trend.

In addition, global investors have been anticipating that the US central bank would begin raising interest rates before the end of the year for the first time since 2006. As a result, emerging markets like Zambia have experienced systematic net outflows of capital, creating pressure on their currencies to depreciate.

More recently, the Kwacha has come under immense pressure, largely emanating from global economic and financial market developments. The major factor has been associated with slow growth in China, the second largest economy after the US.
Chinese authorities recently announced changes to their foreign exchange management, a process that resulted in about 4% devaluation of the Renminbi (Chinese Yuan) against the dollar. Fears that the Chinese economy is slowing down have caused major global stock markets to plummet while emerging markets currencies experienced excessive volatility.

The regional currencies that have depreciated include the South African Rand, the Tanzanian Shilling, the Ugandan Shilling and the Ghanaian Cedi.
Commodity prices, including copper, have dropped with the Zambian economy impacted adversely through the decline in the price of copper, which has fallen to around US$4,900 per tonne from above US$6,500 per tonne in 2014.

These developments apart from underscoring the long overdue need for the diversification of our economy to reduce dependence on copper, they also provide an opportunity for the country to take practical measures to respond to the challenges of diversification.

Difficult as the situation is, it is an ideal time to actualise this structural transformation. The movements in the exchange rate are sending clear signals that our economy needs an expanded export base and a reduction in unnecessary imports.

“In recent days, we have seen an acceleration in the depreciation of the Kwacha against the major currencies. The increased volatility appears to be reflecting market panic more than underlying fundamentals,” the Head of State said.

“I therefore deem the Bank of Zambia’s current monetary policy stance appropriate in anchoring inflation expectations. I have to this effect directed the Minister of Finance who leads the fiscal policy team to work closely with the Central Bank (which is responsible for monetary policy), to assess additional market intervention measures to address the observed excessive volatility.”

The envisaged interventions are designed to calm the markets and allow fundamental factors to be the main determinants of exchange rate movements.

2.Energy situation

Owing to erratic rains last season resulting in low water levels at Kariba dam and Kafue Gorge dam, Zambia’s hydropower generation has drastically reduced leading to ZESCO’s massive load shedding to save power. This has adversely affected households, small businesses like barbershops, hair salons, poultry, welding dependent on electricity, big industries and other essential services.

“This is what I think about every day and I want you to know, I want the nation to know that no one feels the anguish of these disruptions more than I do. My Government is doing its very best to alleviate the suffering of our people.”

The President deplores the current power-cuts, which are adversely affecting industry across the board and have the effect of reducing our Gross Domestic Product Growth to below 5 per cent. The President therefore will require an improvement in areas, which are not acts of God such as in the areas of operations.

In the interim the President has sanctioned a series of remedial measures including importation of power to contain shortfalls.

For the medium and long term the President wants to see determined and expedient efforts to promote investments in alternative power schemes which have short gestations of six months to a year.

The President is hopeful and confident that the decisions to adjust the tariff to 10.35 cents per Kwh will spur investments.
With the transfer of shares on 24th August, 2015 at the behest of the President, from the Minister of Finance to the Industrial Development Corporation (IDC), the President expects IDC to spearhead the accelerated investment in the power sector.

The IDC will now be able to go to the market in the coming weeks to raise an initial US$500 million to invest in the energy sector and other related infrastructural development programmes.

It is necessary for both expedition and corporate culture to use IDC as a delivery vehicle. The President wants to see Zambia as a power exporter in the next one to one and half years when another 600 megawatts could originate from the thermal subsector.

The President wants to thank the Zambian people for putting up the inconveniences of power cuts. He assures that their agonies will not be inordinately prolonged.
“I now instruct ZESCO to quickly identify and contract firms that are offering the lowest cost of generation for solar and which will allow ZESCO to earn a profit considering the current retail prices for electricity until Zambia has rebuilt and owned its generation capacity to its actual base load.”

“I am fully aware of firms that have over the years been offering alternative energy solutions at prices lower than the current tariffs with the benefit of long term concessional funding which would allow ZESCO to own the facility upon finishing construction and not require subsidies from the Treasury,” the President said.
Government’s desire is a ZESCO that is profitable, reliable, self-sufficient and does not rely on expensive measures such as the importation of power from outside the country or buying power at expensive prices from independent power producers (IPPs).

The power deficit is not only peculiar to Zambia but is being experienced in the entire SADC region and therefore, due to the current generation deficit we are experiencing, the national power utility, ZESCO Limited is currently carrying out load management in order to conserve energy.

Government is working tirelessly in order to mitigate the impact of the power shortage, which has affected all sectors of the economy.

It is in this regard that the government is supporting ZESCO through the implementation of some medium to long-term measures to cushion the impact of power rationing on the economy.

The following are some of the measures that have been put in place:

(i) Government has signed a contract with an Independent Power Producer Aggreko for the supply of emergency power of up to 148 MW with effect from 1st September 2015. An additional 40 MW will be available from January 2016.
(ii) Government is currently negotiating with another IPP for the supply of an additional 150MW, which will be available by January 2016.
(iii) The 300MW coal fired power plant being constructed in Southern Province in Maamba will bring on board the first 150 MW unit by January 2016, whilst the last 150 MW is scheduled for commissioning by the end of the first quarter of 2016.
(iv) The 120 MW, Itezhi-Tezhi hydropower project is 87% complete. The first unit of 60 MW is scheduled for commissioning by December 2015, and the last 60 MW unit is scheduled for January, 2016.
(v) Further ZESCO has initiated a project to install distributed solar plants to the tune of 300MW and commissioning is scheduled to start in the fourth quarter of 2016.
(vi) ZESCO has continued securing power imports of up to 300 MW from EDM of Mozambique and the Southern Africa Power Pool Day-Ahead-Market during off peak periods.
(vii) The procurement process for the 750 MW power station at Kafue Gorge Lower is nearing completion. The shall keep the nation informed on the progress being made.
(viii) ZESCO is looking to spread the hydrological risk by exploring sites on the Luapula River.

The President therefore takes this opportunity to appeal to all users of electricity to practice energy efficiency during this period, and we also encourage the use of alternative sources of energy such as Liquefied Petroleum Gas and Solar for cooking and heating.

3. Conclusion

The President regrets there are citizens who have a field day when the country experiences difficulties which arises from external factors beyond our control. Nobody, let alone government, has magical solutions.

The challenges the country faces today are real and unprecedented and should not be reduced to mere political rhetoric. “While I take the lead in providing decisive solutions to these challenges, I ask all Zambians irrespective of political affiliation or any other interests to unite and come together so that we as a nation can pull through these challenges.”

The President wishes to state further that he will announce additional measures in his State of the Nation Address through the National Assembly on 18th September 2015.
The Head of State will provide comprehensive direction to the Nation on short and medium term interventions to cut costs, diversify the economy and reduce the nation’s dependency on copper and hydropower.

Issued by:
Amos Chanda
SPECIAL ASSISTANT TO THE PRESIDENT
(PRESS AND PUBLIC RELATIONS)
STATE HOUSE

43 COMMENTS

  1. Don’t hide behind a statement issued by your spokesman. Go to the national broadcaster and issue that statement yourself. The nation is in a serious crisis, yet you delegate your spin doctor to issue the statement? This man surprises me.

    • Its Friday evening, his favourite day of the week, the man has to attend to pressing matters at the counter with the Bar Man!!

    • Ba Lungu naimwe – please reduce public expenditure – too many Zambian embassies abroad, too many by-elections, too many ministers, district commissioners, etc. And too much borrowing. Tax the mines – let the mines pay their fair share in taxes, then government does not have to borrow!

    • A very hollow statement coming from a head of state without tangible measurable solutions to the problems at hand. Give us metrics with timelines that you will review with the public to measure your performance on these issues, otherwise the above statement is like a grade 2 promising biscuits to his friend.

      How will small and medium sized enterprises increase their production of exportable goods without electricity? Answer this one for us Lungu. You think production will increase overnight like magic? You have no experience at all, that’s why you make such hollow unreasonable statements.

      Zambia is in trouble with such leadership who have no tangible plan for the country.

      Lungu kuya bebele

      Viva HH

    • READING BETWEEN THE STATEMENT(ality)

      1a. You are on your own. Do what you like.
      1b. We are royally screwed.

      2a. You will remain in the dark for a very long time.
      2b. The light bulb flashing above my hat tells me to borrow big. Again.

      3a. Opposition are really pissing me off.
      3b. Don’t expect my voice til 18th by which time you will have forgotten as I will inevitably do dumber stuff by then.
      3c. Refer to 1b.

    • This is the worst statement written for a head of state anywhere in the world. It lacks substance, no depth. It shows how State House and Edgar are detached from reality. When Edgar said he had no vision , he meant it. SA and Botswana have reduced fuel, these are global trends. Are we likely see fuel reduction of fuel in Zambia?

  2. Surely what wrong with this lazy bum Edgar…he is happy to attend dinner Parties, Golf tournaments, By Elections Rallies, Celebratory dates in foreign countries BUT he can not host a Press Conference at State House and speak to the nation!!

    • “….the Industrial Development Corporation (IDC), the President expects IDC to spearhead the accelerated investment in the power sector.
      The IDC will now be able to go to the market in the coming weeks to raise an initial US$500 million to invest in the energy sector and other related infrastructural development programmes.”

      These empty tins never cease to amaze me…so they are going to go back on to the market and borrow half billion dollars ($500m) how did they even come up with these figures…why not increase tarriffs and attract energy investors instead…the bum Lungu can not even tell the people himself as its the people who will paying back these loans.

  3. Zambia shall be free of economic infected leaders. Leading a nation is not a joke. The people advising Lungu are not doing him a favour. Fire Mr Finance and Put Danny Kalyalya find a suitable person to replace Kalyalya at BOZ. Uncle ABC has reached his End of Thinking Capacity(ETC)

  4. What a flea circus in Zambia-when him is busy borrowing loans on high interest rates without hedging the kwacha! He’s also busy splashing out eurobond kwachas via corrupting the many gullible & lounge lizards Lazarus such as kapita! Alungu also is busy corruptly receiving enormous eurobond kwachas through globe-trotting almost every week before his imminent exit next year!Just yesterday he’s on record telling poor chipolopolo boys saying I have been invited by Kenyan president!One would wish the kenyan president MUST foot out all the expenses involved since its at his pleasure & will.

  5. In any case,Alungu is correct in all his actions because he openly told gullible voters that he has no vision & let alone never committed himself to any social contracts!Its those who voted for him who should not complain as they are really enjoying the unprecedented developments thriving under him such as;no loadshedding,no inflation, low unemployment, low fuel costs,free education,no corruption,no political violence,massive infrastructure development,student loans,people driven constitution & many other ‘me toos’ from HH!

  6. @Patrick,sometimes I find it immoral to insinuate that Zambia exports copper!Zambia does not export copper in real terms & this is what we zambians have failed to actualise & contextualise!Its like a landload claiming to be selling commodities sold by the tenant!These so called mines are in foreign hands-firms;if any anything,Zambia gets much of its revenue from PAYE, taxes from her borders -tax duties(tariffs/quotas),VAT & exporting non traditional products & aids from corporating partners!

  7. How many people have access to the internet to read this piece-meal statement? Where did he issue the statement? Why can’t he call a press conference and read this statement and answer queries of clarification? Why become a president if you know you are incapable to face citizens’ concerns and queries?

    • ..the chances are that even Edgar has not seen and read thru this….even if he did may not have ‘comprehended’….

  8. The thing is Edgar didn’t prepare this statement and I’m sure if he was asked about something in the statement he will express surprise! This man told us, he had no vision but we went ahead and put him in state house because we didn’t want HH, not because of anything but out of petty jealousy! Kaponyas and cadres, shout again ‘ifintu ni Lungu’ kaili! And have food on the table! Mulenya amenshi ba fikala!

    • How can they show “ifintu ni Lungu” in total darkness and no fuel in their vehicles like they ignorantly did in December last year….laughable indeed!!

    • @Kaputo Davies
      That’s spot on. The writing was clearly on the wall and Guy Scott warned us but we accused him of being part of the hypothetical cartel. As though that was not enough Lungu confessed he had no vision and this has been attested by his inertia to act on the current crises. If we think we have seen the worst, then we will be in for a rude shock because the worst is yet to come and we will surely vote wisely next time. This is self inflicted punishment, deep down our hearts we knew HH was the better candidate but we played the tribal card.

  9. Ba Zambia finshi mulefwaya natwishiba fwe bene eeeeh Lungu eeeh Lungu eeeh Lungu eo tulefwaya x2 via singing kansi ni malabishi yeka yeka useless President

  10. What did Kwambili say?

    HEADS MUST ROLL!

    Borrowing more is NOT the answer. It was what got us into this SHlT. If Lungu is too spineless and afraid to FIRE the USELESS old fossil Chikwanda, he must take the blame for this mess himself.

    It will be HIS head to roll.

  11. You guys need to watch that documentary called “stealing africa – why poverty” its about zambia and why these mines in the name of copper are making zambia broke. It will open your eyes. Find it on youtube.

  12. How do you say that when you as gvnt you are busy importing? We have kafue steel yet,you import steel. Where is supporting local industries coming from? Bring back intelligent people to their respective positions and let them work. Look at the way Fundanga,Magande and Stumbeko worked to help the kwacha, don’t take things personal. There are a lot of things we see being imported by gvnt yet we have local industries producing them.

  13. @:candy yum yum. I`ve watched the youtube documentary – Stealing Africa – as you`ve advised. It`s interesting to note that our very institutions -ZRA and ZEMA – are perpetuating poverty by their failure to properly work within the confines the guidelines under which they were enacted. The interventions stipulated by the President`s spokesperson – Amos Chanda – are nothing more than a fart in a windstorm – to put it precisely. Lungu is only taking us further down in to the bottomless pit with visionless and spineless leadership. It is really upto us to seriously push for the type of future that we want to have

  14. The hallmark of a leader is known on how well he leads his people in times of difficulties. The dollar depreciating is not the government cause per say , but due to falling copper prices on account of decline demand from china, the question are we seeing leadership in the midst of this economic problems. There is NO leadership no direction on how to mitigate the effects on the ordinary Zambian all we seeing is talk talk.it a lesson for us Zambians, lets vote for seriously leaders.
    Rising food prices are a recipe for civil strife

  15. Need to invest in ZESCO, ERB, Meteorological and DMMU infrustructures. It should be soon before the rain season begins

  16. Same pipo uttering same pro HH.
    HH will never be President finito
    Even if Kwacha went to K50 per 1$, HH will still lose, Why Mabisi mustatah wanyinha
    Imwe bamabholho, look into your face and see if what you are seeing is Zambian. It is not that is why we shall prevail. One known as Fred Post Kachaepa Namkando Mmembe is rabid dog in daily lamenting and no one is paying attention. It will soon come to past even with you bakolwe. Misata yanu. Finyho fyenhu

  17. You see, the measures are in place mr hh. What else is eating you that you shud tell your voters in southern province? So it means now that even you hh should not be an exception to these measures.
    Stop importing mabisi, chips, milk from south Africa, and promote your own mabisi. Also start growing potatoes not only chingovua. Export your sugar. not canes….processed sugar.

    The biggest investment hh can do is to stand as MP in Choma as you shall definitely win those elections, so that you start gaining experience in governance.

  18. I do agree with Mr Lungu that our country needs a stabilised economy with greater emphasis bing placed on manufacturing and exporting finished goods, while local products consumption became the norm. There is need also for empowering Zambians through ownership and recognition of the retention of Zambian professionals and experienced personnel in companies. The Mugabe formula of 60:40 is reasonable, I feel. What has destroyed our country is the lack of educated leadership, people who recognise the long term impact of policies and actions. Local manufacturing is collapsing every day, as the government officials go round the world asking for investors in areas of low technology, like milling, when what we need are technological advancements. Foreign investors should be invest in areas which…

  19. The statement is largely naive or advised by sick people, my beloved President, if you think that investments should continue to centre on Zesco. Good tariffs are part of the solution but Zesco is not. Diversification of energy sources is part of the solution, so is diversification of investment sources and energy companies, but Zesco monopoly is NOT.
    Consult widely Mr President, clearly your advisors are past the “sell by date”.
    I hope that you will have seen the folly of “your” statement and take necessary corrective actions by the time you give the state of the nation address at parliament, otherwise now you sound no different from underfive HH, passing costly least thought out statements.

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