The consequences of excessive debt that I predicted three and half years ago and again 18 months ago, are now here with us, tighten your belts!
By Kalima Nkonde
In January, 2016 and again in January 2018, as a patriotic and non-partisan Zambian, who means well for the country, I penned two comprehensive analytical articles in a layman’s language. The articles were meant for the man on the street, cadres, our leaders in government, opposition parties etc. who do not understand the technical economic jargon to educate them about the consequences of excessive borrowing and the ambitious, massive infrastructure programme that our Government had embarked which President Lungu vowed to continue in spite of all the rational economic advice from experts.
In light of the austerity measures re-announced in an emergency cabinet meeting last week on May 27, 2019 , I have reposted my two articles through links below so that there are a reminder to government that, had they heeded my advice and others, we would not be in the mess we are in today. The economy would have fully recovered by now as it started showing such signs from early 2017, when IMF negotiations were going on and their team were literally supervising our economic management indirectly through providing technical expertise which was the basis of the “ Zambia Plus programme”.
The articles in the link are also a reminder and a warning to the current administration that things will get worse if the measures they have announced, continue to be mere words and no serious action of implementation is taken. It is as certain as the sun rising that by 2021, if measures are not implemented in full, the electorate may not be forgiving and charitable again. They will argue that we had an economic crisis 2015/16, and five years on, we are still in a crisis mode and ask questions: “what the hell is going on with economic management with all the advice?”. The answer will be crystal clear for all to see and feel.
I would advise government that more measures be taken to change the current negative perceptions about government to signal seriousness through actions that are conspicuous to the public. Perceptions can be more important than reality and these need to be managed by experts not cadres. The issue of big government needs to be tackled. There is need to take measures like reduction of the size of cabinet like South Africa has done, reducing Presidential motorcades, reduction in “working” visits by the President so that he spends more in the office.
The President should also take more responsibility by communicating to the electorate directly rather than through ministers and the Press Aide. If truth be told, the delegated statements by the aforementioned are not taken seriously by the public and investors. The President needs to be addressing the nation on critical matters like the current economic crisis and the KCM debacle so as to re-assure the nation and calm the markets, as his predecessors used to do.
In order to put the Zambian economic status in perspective as at the beginning of June, 2019 and to show readers why President Lungu held the emergency cabinet meeting, below are some of the economic metrics which are all trending southwards.
The numbers should concern any Chief Executive of the country and compel him or her to take brave and bold steps, take responsibility, and announce the austerity measures personally and not delegate the task to a finance minister whose stock was plummeting due to negative publicity. It really bothers some us, as Zambians, who are enlightened about how markets operate and the importance of communication and messaging, wonder if any thought is given to some of these issues. The finance minister should not have been given such a responsibility this time when she was on the ropes .Below is the current economic status of Zambia which in my view, is not yet very dire or catastrophic yet, but whose trends are very concerning because the impact has started trickling down and negatively affecting main street
- Monetary policy rate from 9.75% to 10.25%;Fiscal Deficit of 7.6% instead of the budgeted targeted 6.1% (capital projects spending and debt servicing for both foreign and domestic debts mainly responsible for the deficit)
- Government bond subscription rate dropped to 22.6% from 21.4%
- Kwacha depreciation from $11.89 in December,2019 K14.00 in May 2019,
- Inflation from a low of 6.1 % in 2017 to 8.1.% in May,2019 due to food prices breaching Bank of Zambia threshold
- Foreign Reserves fell to $1.4 Billion (1.7 months import cover) from $1.8billion in December,2018
- Commercial bank lending increased from 23.6% to 24.6%; Private sector credit continuously declining
- Subscription rate for government bonds reduced to 29% from 33%,Portfolio investment declining resulting in less forex inflows
- Economic growth for 2019 has been downgraded by IMF to 2.3% from 3.7% in 2018.
- Debt/ GDP ratio is at 73.1% including domestic arrears at end-2018
- Debt servicing percentage to revenue over 25%
- Eurobond yield 22%, one the worst performing in the world apart from Venezuela
Although the above statistics are trending upwards, all is not lost yet and the situation can still be arrested and reversed but well thought out strategies including a proper communication strategy involving the President and the re-engagement of the IMF can accelerate the recovery.
In order to simplify the effects of the above technical statistics to the man on the street, and to demonstrate that they affect all Zambians regardless of political affiliation, here is the impact of the above statistics. The negative statistics are reflected in the high prices of commodities including mealie meal, high unemployment rate (lack of jobs) especially among the youth, low forex inflows from investors, shortage of cash in the economy, late payment of salaries, late payment of suppliers, late payment of farmers shortage of medicines in hospitals, cancellation of University students allowances, non-payment of pensioners etc.
Below are links to my January,2016 and January,2018 articles where I outlined the dangers of the ambitious, massive infrastructure programme and the excessive borrowing binge that the government had embarked on. The fears that I and others had warned about, are slowly materializing thus the emergency cabinet meeting and the consequential austerity measures announced for the umpteenth time. We hope that this time around, there is political will to see the measures implemented in full.
A silly reactionary government which only wants to act when things go wrong. This is one thing that my swiss wife distates about most Zambians. You guys my mixed race sons blonde girlfriend who is only 18 hit on me. What should I do ? I asked this question last night. I need your help
Everyone has been vindicated including the pee-eff and their brain dead sympathisers.
The bed has been made, now we need to lie in it.Very gloomy prospects. I don’t think I would get on a plane where the pilot confesses to not knowing how to fly plane. A few years ago someone confessed not having a vision.
[“Mice in the pot” by Pilato, playing in the backgound]
Things sound more convincing when the message comes straight from the horse’s mouth. If Lungu wants to convince us he should take heed. Even the Kwacha knows this.
If I were HH I would take heed
President should also take more responsibility by communicating to the electorate directly rather than through ministers and the Press Aide.
Only one solution remains here guys and it requires all the professionals in Zambian to do an AL BASHIR OUSTER on drunkard Lungu.
Umwenso nifwa.
Lungu must go!
The Feel-Good Factor for general citizenry went to rest with LPM at Embassy Park, briefly came back to life with MCS and said goodbye for the second time and perhaps for a very long! Them that think otherwise let them think again!
MCS is the genesis of all this sh!t. Were he still here we would have been in the exact same situation.
@2.1 Dudelove,Yes we could have been even with Sata as it was inevitable to borrow just like the 1st Eurobond was planned by MMD but borrowed by PF but I doubt we could have seen so much debt with so little done with it.Yes MCS was quit chaotic but corruption in public offices was NOT the order of the day as it is now,spearhead by people Sata had in fact fired!!
The Feel-Good Factor for the general citizenry went to rest with LPM at Embassy Park, briefly came back to life with MCS and said goodbye for the second time and perhaps for a very long time! Them that think otherwise let them think again!
U cannot manage an Economy thru Propaganda. The depreciation of the Zambian Kwacha from USD 1 to ZK8 to ZK14 says it all. Things have fallen apart as the Center can no longer hold. The ECL Govt embarked on reckless Fiscal Policy and massive Corruption deals in Infrastructure Projects. They are now panicking as the Economy collapses. The mishandling of the KCM Shareholders Dispute will further depreciate the Kwacha and Consumer Prices will skyrocket. The writing is on the Wall.
And this is where PF supporters remain as silent as Church mice.
That’s because they do not fully comprehend the real economics of the thing. It’s beyond them mate. Sad really.
Yeah I recall the President telling the nation , I think it was at the airport that he would not stop borrowing. What has changed?
Skylab
Am sure he was serious,his problem now is that no one even the Chiese can lend him money.If you are so reckless to the extreme even the extemely reckless avoid you,am sure China must be worried as to how this government will pay back it’s debt.
This guy is just dull, it has now been proven…. maybe Sean Tembo was right he is sick in the head
This is the worse and dull government ever in the History of Zambia. The late president FTJ (m.h.s.r.i.p) and his government used to steal but not like the way this government is stealing.
A government of sycophants and kleptomaniacs.
THIS IS ZAMBIA PF ARE LEADING AND ARE HAPPY WITH SUCH ACTIVITIES. THIS IS DAY LIGHT ROBBERY. ROBBING YOUR OWN PEOPLE USING POWER AND VULGAR LANGUAGE ON OTHERS SO THAT YOU CAN HIDE OUT YOUR SCAM OF THEFT.
SEE HOW THEY TALK, ZAMBIANS ARE WATCHING THEM WITH FEAR. THEIR IS NO ONE WHO CAN SPEAK AGAINST THE ACT WITHIN THEMSELVES FEAR OF BEING FIRED OR KILLED BY FRIENDS. THESE CROOKS HAVE NO MERCIES AT ALL.
The president’s words will unfortunately always just be words. Technocrats lack the necessary cohones to tell the govt the truth.
Who would celebrate to see their own child drown because the child was stupid to jump into the pool in the first place. Even if we point fingers at who is to blame the fact is we all affected by the economy edgar has destroyed with his government. So the question for us all is “what can we do about this situation?” are we going to fold our hands or are we the people going to realise we are the masters of our country and rise to take corrective measures. The thing about pressure is that when applied some people fold while some thrive when the situation calls for it. so which person are you?
The only solution is to get rid of this dull government and it’s clueless leader coz right now the general citizenry has no access to the instruments of power. The only thing we can do is offer advice and criticism both of which are ignored by these arrogant b@stards. Unfortunately, CB and Lusaka will again let us down in 2021, these are the epicenters of dull voters. I mean how does one explain voting in Miles Sampa as Mayor considering all the other intelligent candidates?
@Rowdy. There is only so much that those of us who are not responsible for this mess can do. You know that govt can improve the economy by paying local suppliers and contractors but in light of these austerity measures govt erroneously thinks it can improve the economy by not paying local suppliers and contractors. The ripple effect of paying local suppliers and contractors on time is positively huge and boosts the economy and the same is the opposite.
Its agony sure, having a president and minister of Finance from Eastern Zambia where any semblence of a comparable evidence to an economy is Malawi, and there is none there for all purposes and intent. Now Zambians will learn to think with their heads and not there bigoted hearts. Voting for a fool thats gone fool cycle into office is a sin, but to vote for an alcoholic thieving fool is plain blasphemy to god!
Why didnt he want the austerity measures enforced the first time.
@Dustin, because people complained, and so they acted compassionately by not using austere measures. However, the economic conditions internationally and continued refusal by the IMF, to release funds, and effects of USA trade wars on China, uncertainty of BREXIT conditions have given international markets ‘flu,’ infecting confidence across board.
Be sued of the worsening and uncertainties, it is now correct that His Excellency s govt gets a bit tougher. It’s not about bad economic strategy, but about being caught short with sudden changes. The Borrowing was a little out of hand because PF begun to use debt to put shortages right, but that only works if the economy is bouyant and able to generate income to quickly rectify the borrowing.
BECAUSE OF… the worsening and uncertainties
Zambia is without doubt now facing the abyss resultant from blind & indiscriminate excessive national borrowing. It’s clear that the current declining national savings & income, spiralling interest payments are leading to large tax hikes & spending cuts, all a result of the PF’s economic stupidity. Now this is aggravating their declining ability to respond to problems. We have never been at greater risk of a fiscal crisis, if we are not in one already. It’s a foregone conclusion that a strong fiscal outlook is an essential foundation for a growing, thriving economy. Putting our nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity. With a strong fiscal foundation, the nation will have increased access to capital, more resources for…
future public and private investments, improved consumer and business confidence, and a stronger safety net. However, the PF failed to act prudently. Our long-term fiscal challenges remain dire & unaddressed, our economic environment is weakening by the day as confidence suffers, access to capital is reduced, interest costs crowd out key investments in our future, the conditions for growth deteriorate, & our nation has now been put at greater risk of economic crisis. If our long-term fiscal imbalance is not addressed, our future economy will be diminished, with fewer economic opportunities for individuals and families, and less fiscal flexibility to respond to future crises. If there were still any people denying that Zambia is now in an economic crisis, Lungu and Margaret’s…
… implementation of austerity should be a very clear message that “nomba ni lwanya lwakwa Noah bebele”.
Zambians need to stop supporting useless leaders such as these who’s only motive is to get rich quickly and not having any care or compassion for the poor majority who don’t even understand the way the country’s economy works. These poor people are quite rightly happy to receive a t-shirt and a gram of maize meal that is thrown at them during campaigns and as soon as they are voted in, they forget about those who voted them in!!!
Zambian people, wake up and smell the coffee and stop supporting thieves who have no care for your basic needs. Stop voting on the basis of tribe or for personal gain and don’t vote in people who have not already made their own money before being president- they will wipe out your national assets!!! See what he is doing now!! He has robed you left, right,…
Lazy Lungu is a joker…he just returned from DRC with 5 ministers attending a funeral of a father of DRC President he didn’t even support in the first place…this Lungu is just a komboni moron who cant even face the nation.
I agree with you. Just to show how stupid he is, today he flies back to copperbelt!! Why didnt he just stop over on his way from DRC and save money as per austerity measures recently announced?
VIVA the great leader EDIGAR CHAGWA LUNGU. The man is chosen by God, he is like moses leading us to the promised land.
Indeed @ Benzu Chakolwa Lungu is leading many Zambians to the promised grave yard earlier than thought!
@Kalima Nkonde, a lot of people have been concerned and the ‘people on the street’ otherwise known as the citizens of Zambia are fully aware of the effects of bad economic performance either caused by changing internal/international economic conditions. People are dealing with late salaries, expensive food supply on the market, those do not need intellectual postulating.
When Zambians write articles it’s always to ‘explain’ things to the imagined undereducated. Why not just write your observations on the matter than patronise citizens? A potentially good article marred by puffy attitude.
I mean are you seriously suggesting changing internal and international economic conditions hold still at the time you publish an article? Things have changed and a positive attitude is required not finger pointing.
We’ve all at one point or other criticised the govts borrowing excessively. I support that element in your article.
Tragedy is a learned person learning from party cadres surrounding him and pursuing the vision of a person devoid of any iota of economic sense.
One can forhive him if he is not the obe who appointrd them, but he DID appoint the whole lot of them plus dunderhead aides.
Tragedy is that Trib.al Hacks and his trib.als are NO OPTION!
IWE,LUNGU BANTU BAVUNTINKA. HONESTLY,I FEEL PITY FOR YOU. I WOULD AGREE WITH SOMONE WHO TOLD ME THAT IT IS A SIN AND A CURSE TO GET SOMEONE WHO WAS SUFFERING AND THEN YOU PUT HIM IN AUTHORITY BECAUSE THAT POVERTY MENTALITY IS STILL IN THEM.HOW DOES SOME ONE HAVE 49 HOUSES CHITALU HEALTH,EVEN THE WIZARD FREEDOM SIKAZWE IS ON THE LIST OF PEOPLE WHO HAVE MESSED US UP.I HAVE NO GOOD FEELINGS FOR THEM.IF,IAM TO BE GIVEN A CHANCE EVEN IF IT WOULD BE AGAINST HUMAN RIGHTS I CAN EXCUTE THEM AND NO LAWYERS TO REPRESENT THEM.LIKE WHAT SANKARA DID.
This is the most dull government ever in the History of Zambia. The late president FTJ (m.h.s.r.i.p) and his government used to steal but not like the way this government is stealing.
This government is bereft of any original ideas and life enhancing projects. No real focus; no vision. A bunch of mindless zombies.
Fyakuifwaila ifintu fimo.