Leader of the Opposition Patriots for Economic Progress Sean Tembo says he noted the confession that was made by the Minister of Finance Dr Bwalya Ng’andu that the K10 billion COVID-19 economic stimulus package has received very low uptake as it has not been warmly embraced by potential beneficiaries.
Mr Tembo says this has not come as a surprise because his Party advised the Minister against such a model for an economic stimulus package, but the Minister of Finance in his infinite wisdom decided to proceed with the current model, against all advice and logic.
He says any model for a sustainable COVID-19 economic stimulus package must address three critical issues namely the mode of delivery, targeting of specific sectors of the economy and qualifying criteria for intended beneficiaries.
Mr Tembo says the current COVID-19 economic stimulus package has failed because it did not properly address the three issues above.
He said the commercial banking system is not an appropriate delivery mode for a sustainable COVID-19 economic relief package, for several reasons among them commercial banks generally have to charge interest rates which reflect the credit risk of each individual customer.
“Given the generally poor trading conditions in the economy, almost each and every business’s credit risk has risen significantly and therefore, commercial banks will require to charge even higher interest rates to reflect the increased credit risk of potential beneficiaries of the COVID-19 economic relief package. This is likely to be unaffordable to most intended beneficiaries”, he said.
Mr Tembo added that commercial banks generally require collateral for the loans that they issue out however, most of the Zambian businesses that have been adversely affected by COVID-19 social-distancing guidelines may not have property that can be used as collateral by the bank.
He said this automatically eliminates a lot of potential beneficiaries from being covered by such an economic relief package.
He added that any sustainable COVID-19 economic relief package cannot apply to the general economy but has to be targeted to specific sectors of the economy, which have been significantly affected by COVID-19.
Mr Tembo said whereas some sectors such as private education, hospitality, passenger transport and entertainment have been badly affected by the COVID-19 pandemic, certain sectors such as mobile network operators, internet service providers, pharmaceuticals among others are enjoying a huge surge in business as a result of the COVID-19 pandemic.
He said it is therefore senseless for Government to seek to implement a COVID-19 economic relief package which applies equally across the board to businesses that have been positively impacted as well as those that have been adversely affected, without any form of targeting.
He said a sustainable COVID-19 economic stimulus package must not utilize the stringent qualifying criteria that are applied by commercial banks to potential lenders, but must formulate its own unique qualifying criteria that can be used to select potential beneficiaries.
Mr Tembo said such qualifying criteria must be less stringent and must take into consideration the fact that the primary objective of the economic relief package is to assist businesses and individuals that are in economic distress.
He said the COVID-19 economic relief package should achieve just that; economic relief and it should not be a source of additional economic burden on the targeted beneficiaries.
Mr Tembo has advised the Minister of Finance to consider withdrawing the current K10 billion COVID-19 economic relief package that is being implemented by the Bank of Zambia through commercial banks to allow for consultations with key stakeholders in tailoring a fresh COVID-19 economic relief package that will have the right mode of delivery, will be targeted to specific sectors of the economy and will have a qualifying criteria that is less burdensome to intended beneficiaries.
He said in terms of the mode of delivery, the Minister should consider utilizing institutions such as the Citizen Economic Empowerment Commission and the Development Bank of Zambia saying it is a pointless endeavor for Government through BOZ to extend cheap financing amounting to K10 billion to commercial banks, who will then charge any interest rates of their choice to their customers, thereby allowing them to make supernormal profits at the expense of taxpayers.
Mr Tembo added that in order to cure a disease, the medicine should be applied on the patient and not on bystanders.