GOVERNMENT and the Bank of Zambia (BoZ) should be commended for fiscal and monetary policies that have stabilised inflation and exchange rates this year, says economist Lubinda Habazoka.
Dr Habazoka said in an interview that much as 2016 had been a tough year, with inflation and interest rates increasing, Government should be commended for its efforts to reduce the two variables.
He however said tight monetary policies should form part of austerity measures in 2017.
“Government and the Central Bank should be commended for fiscal and monetary policies that have stabilised inflation and exchange rates.
“But what we should not forget is that tight monetary policies are austerity measures in a way. When citizens are unable to access funds, it becomes difficult for businesses and households to get resources cheaply for their use,” he said.
Dr Habazoka explained that Government should not proceed with its planned “debt refinancing programme” in 2017 to avoid tougher measures in the future because bonds were better refinanced when they were about to fall due.
“More debt accumulation will cripple our economy. Another US$3 billion debt will see the Kwacha trade above K18 per dollar as we might struggle to find forex to service capital market debt.
“Government should also be very careful with the toll gates currently under construction,” he said.
He said the best austerity measure was to cut Government spending and not increasing tax.
Dr Habazoka said increased taxes mostly affected potential for small business owners.
He explained that households should have been given a relief on taxes to increase consumption of goods and services in Zambia because increased demand will lead to economic growth.
“As we enter 2017, there is hope that the Kwacha will stabilise as mining activities increase amid bullish metal prices spearheaded by Trump’s promise to increase infrastructure development in the USA,” he said.