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Thursday, June 30, 2022

Inflation will drop under Hakainde Hichilema’s Presidency

Columns Inflation will drop under Hakainde Hichilema's Presidency

By Charles Kakoma, UPND Spokesperson.

The cost of living in Zambia is very high. Everybody is complaining about the rising prices of goods and services. Inflation has run out of control.

When one goes to the market these days, he or she is greeted by high prices of tomatoes, onions, and other vegetables. In fact, marketeers now count how many tomatoes they put in a packet or on a hip. Tomato yadula!!.

Gone are the days when one would walk in a supermarket and just start picking things and throwing them in the trolley without looking at the prices. Prices of groceries have gone up. Sugar is now about K40 per 2kg while the bread is now about K15 per loaf. Mealie-meal prices have jumped from K35 per 25 kg under the MMD government to K150 or more under the PF government.

The general increase in the price level is what economists call inflation. By definition, inflation is a persistent generalized increase in the overall level of prices of goods and services in the economy. Rising prices reduce the buying power of money. In other words, inflation is the decline in the value of money. When inflation gets out of control, it is called hyperinflation. Zambia is now close to hyperinflation.

In 2006, Zambia managed to reduce inflation to a single-digit level of 9% for the first time in three decades. This achievement has been wiped out by the PF government in the last 10 years of their irresponsible rule. Inflation has jumped from 7% before PF took over the government to more than 18% last month, according to the Central Statistics Office.

Inflation is the number one enemy of the economy. It is practically impossible to manage the economy under inflationary conditions.

Inflation has to be brought under control if standards of living for the people are to be uplifted. Inflation tends to affect the poor people the hardest. This is because the largest component of inflation in Zambia is food inflation and most poor people’s income is spent on food.

By far the largest cause of inflation in Zambia is food prices. Food items dominate the Consumer Price Index. Food prices are affected by shocks such as fuel price increases and exchange rate depreciation that lead to increases in transportation costs.

In order to tackle food inflation, the costs of production of food have to be brought down. The UPND has committed itself through its manifesto to subsidize farming inputs to lower the cost of producing food. I have just bought urea fertilizer at K625 at Farmers Barn in Lusaka. At that high price of fertilizer, it is impossible to produce cheap maize. Similarly, the prices of stock feed are skyrocketing. A 50kg bag of chicken feed is now over K400. No wonder broiler chickens at markets are now selling at K70 one while eggs which used to be a poor man’s relish are now at K50 per tray. Which poor person will afford to have a chicken or eggs?

High inflation has to be fought because it contributes to poverty as the purchasing power of people’s income is eroded. High and unstable inflation makes it difficult for the business community and households to plan. At the household level, for example, it throws the family budget into disarray when one plans to buy a stove for K3000 and has taken a long time to make savings but only to discover that the price has gone up to K4000. It also leads to a loss of confidence in the local currency. We have witnessed a situation in Zimbabwe where the country abandoned the use of the local currency and resorted to using the American dollar.

Even here in Zambia, people prefer to quote their rentals in dollars rather than kwacha.

High inflation also discourages mobilization of savings since the saving public is aware of the loss of purchasing power of their money if it is deposited in a bank where the interest rate on savings is lower than the inflation rate.

High inflation also leads to high lending interest rates which in turn discourages borrowing for investment which is critical for sustained economic growth.

Apart from high food inflation, the country is also facing high non-food inflation. In this category are items like transport, communication, rent, fuel, electricity, clothing, education, health, and household goods.

Non-food inflation is caused by an increase in money supply, prices of fuel, depreciation of the kwacha, fiscal deficit financing, and high inflation expectations by the public.

Excessive money supply growth which is not supported by economic growth is inflationary. In simpler economic terms, increased money supply results in “too much money chasing too few goods “.

Over the years, we have witnessed growth in the money supply without corresponding economic growth.

In particular, the growth in money supply has been linked to fiscal deficit financing. The government has more and more resorted to borrowing money from the Bank of Zambia and other local financial institutions for consumption.

When the borrowed funds through treasury bills, bonds, and other instruments are spent on consumption, it results in the increased money supply not supported by production.

In its desperation, the PF government has been intimidating the Central Bank to give them money to meet their excessive expenditure. The financial indiscipline in government has resulted in the government living beyond its means. The PF government is broke and to continue sustaining government operations, they have resorted to financing the budget through excessive borrowing from the local banking system. They have also overborrowed from abroad thereby landing the country in a serious external debt crisis.

When the UPND government comes into power in August this year, we shall limit deficit financing to no more than 2% of the Gross Domestic Product from the current 6% of GDP. The UPND government will also cut reckless and excessive expenditure on consumption. The combined effect will be to lower inflation in the economy.

In addition, the UPND government will lower the prices of petroleum products. Increases in fuel prices are a major contributor to inflation in Zambia. Increased fuel prices are transmitted through the prices of other goods and services in form of higher transportation and production costs. In order to tackle the high petroleum prices, the UPND government will cut off middlemen from the supply chain and remove the incentives for corruption in oil purchases. It will also encourage the private sector to get more involved in the direct importation of fuel supply instead of depending on the government to import the fuel.

Lastly, the UPND government will reduce inflation by lowering the exchange rate of the kwacha against other currencies. In an import-dependent economy like Zambia, the exchange rate is a major cause of inflation. Each time the kwacha depreciates, almost all the prices of goods and services increase. The kwacha will appreciate UPND President Hakainde Hichilema taking over as Republican President after the August 12 presidential and general elections because of market expectations and confidence in his ability to manage the economy. The kwacha will also appreciate it because President Hakainde Hichilema has a solution to the country’s choking foreign debt. The high external debt has by far the greatest impact on the exchange rate in Zambia. By putting a moratorium on debt, restructuring the debt portfolio, attracting foreign direct investments and donor support, there will be increased inflows of foreign currency which will result in the appreciation of the kwacha and lowering down of inflation. In the long run, the inflationary pressures will come down through increased production for both domestic and export markets which will result in supply outstripping demand and lowering both the exchange rate of the kwacha and inflation.

40 COMMENTS

  1. Yes without a Vision People perish. This is a Management and Confidence issue. HH and his Economic and Financial Literate Managers will manage and turnaround the Economy. Policy consistency will be key to a sound macro-economic management of the Economy. Zero tolerance of corruption will be a departure from the Visionless and Corrupt PF Regime. Most Zambians are feeling the pinch and we hope that on August 12,2021 they will vote wisely and 4 change.

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  2. Very very true and well put. If only people can open their eyes to see what’s happening in the PF led government then we can be assured of UPND victory in August 2021.

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  3. Fuel prices have been stagnant for over a year. It’s surprising how commodities like beef have doubled. This upnd pitch is academic, like a copy and paste presentation. It doesn’t encompass aspects like their mining policy which affects the country’s taxes.

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    • Forget beef my friend, all prices have doubled and in some cases trippled. The dollar has shifted from 14 year ago to 22 in 1 year. What are you talking about ? Don’t be dullo!

  4. Kakoma my relative i dont agree with you on the rate of exchange. What guarantee is there that when HH assumes power the kwacha will appreciate because of market expectations and confidence in his ability to manage the economy. It is a fact to everyone that HH has never run an economy in his life so he has no experience. If he so becomes president he will come as a novice as far as ecponomic management is concerned. In view of this he will need time to learn how to do it so beacause of lack of this experience he has a long learning curve. You can now see that currency appreciation based on market expectations and confidence in HH’s ability to manage an economy is very slim if not there. Tell us something else that can convince us, not this trash. Another thing is that almost every…

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  5. A new broom sweeps clean. Zambians are yearning for change in Leadership. People can’t imagine another 5 years under the Visionless,tainted and corrupt PF Leadership. People can’t wait to cast their votes 4 HH aka Bally. Bally will fix it!

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  6. Well keep on telling them the PF chaps. For them is chapetepate hoping oneday to score big. It never happens that way and economy will only get worse.

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  7. Zambian Citizen 
    February 11, 2021 At 8:14 am

    ” Fuel prices have been stagnant for over a year. ….”

    Fuel prices on the global markets have dropped to under $30 pb…..and this has not been passed on by the PF looting mob lead from state House…..

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  8. Watched malnourished youths dancing to PF campaign song in Lusaka. they should have eaten before making video, uluse ine.

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  9. Charles Kakoma is a Patriot. He was offered K3 million, a house,a car and a job from ECL if he defected to PF. Kakoma refused to defect to PF in exchange for 3 pieces of Silver. How many Men can refuse such an offer? GBM failed to resist the Bribe and went back PF and is now enjoying the vomit. It looks like CK is under pressure from PF for him to bite the sugar coated bullet. Which way CK?

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  10. This man Mr. Charles kakoma’s statement is not well coordinated, how does HH going to brig down inflation to a single digit, arrest depreciation of the Kwacha without tackling creation or revamping industrial capacity of means of production of goods and services which in turn will create job opportunities. There is also need to seal all loop holes in government tender chain as it is the conduit number one. Mr. Kakoma should bear in mind that if UNPD’s wishful thinking becomes a reality after 12/08/21 will have a huge mountain to climb as the PF has created a lot of problems for the country. Last evening there was news item on ZNBC TV1 that Kafulafuta dam infrastructure is being vandalized before even being commissioned. This is lack of seriousness at safeguarding public infrastructure…

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  11. Apparently Under hh:
    Manna will drop from heaven, all those with HIV will be cured, water will be turned into wine, everyone will become a millionaire overnight.

    Only a f00l can be so f00lish to believe these f00ls. Even my daughter who is in primary school knows that upnd is full of knuckle heads. Grow up you bush goats

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  12. After 10 years in Power PF has demonstrated beyond any reasonable grounds that have no Vision and lack competencies to manage a modern Economy viably. Corruption in PF is Rampant top to bottom. ECL in particular has no Respect for Constitutionalism,Rule of Law, Good Governance and Human Rights. Come August 12,2021 Change is of necessity. Time to vote 4 HH has come. Bally will fix it. The writing is on the wall.

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  13. Well….HH certainly has the right cv to turn things around economically in Zambian.

    And some are asking how ?????

    By carefully economic management, zambia right now needs an economic manager, not a fraud convict lawyer incharge….

    Even if the world gave lungu and PF $60 billion , after 10 years they would be back begging for aid and debt relief …….

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  14. YES YES YES INFLATION WILL DROP AND THE GOOD LORD WILL DROP MANNER FROM HEAVEN
    AND ESPECIALLY WITH KZ THE BORN AGAIN ENCOURAGING THE LORD WITH HIS DAILY PRAYERS
    SO TY TY KZ
    BUT AGAIN FORGET UPND FOR A MOMENT AND LET ANY OTHER PARTY WIN APART FROM PF
    THE ZAMBIAN POSITIVE SPIRIT AND PATRIOTISM WILL RETURN BIG TIME !!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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  15. Total u5 fantasy kikikikikikijukija.
    We shall no waste time on false hope.
    To much bapompwe in this grouping.
    Before we know it each one of them would be driving a Bugatti.
    Kikikikikikijukija fumeni apa ba yupeendi bufi bwenu.
    Falling short of how the fantasy would be realised.
    Cheap polical statement!
    No Vision
    No SMART objective!
    No tangible action plans!
    Square failure sit down.

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  16. Government is not a joke! A simplistic approach to governing, like yours,will not win you votes. What is inflation to a villager at Chibombo or Na Bwalya or at Mapoloto in Chilenje?

    Kakoma,you make dullness look like a virtue.Think Mwatiyanvwa or Mukulumpe.

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  17. Non sense…under5… HH is hopeless, useless Tell him to give back the farm he got from that poor family after one of the relative past on..

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  18. LETS JUST ADMIT WE ARE BEGGERS UNDER PF
    ENORMOUS DEVELOPEMENT SURE !!!!!! ALL BORROWED MONEY
    AND WHO IS GOING TO PAY BACK THESE LOANS CERTAINLY NOT PF
    AND CERTAINLY NOT YOUR CHILDRENS CHILDREN
    WAKE UP FOR GOD SALE ZAMBIANS

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  19. Yaba..these crooks ba under5 you have never had a manifesto…it’s always your fake 10 point plan! 20years down the line this is when you want to come up with a manifesto.. My foot..Get lost.

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  20. The English say “its easier said than done!”. But who said Hichilema will be president or who decided that? Just Upnd in their small brains have dreamt that Sammy Hichilema will be president! How and where? In 2016 your hero was one D. Trump, because he’s a “successful” business man, Sammy Hichilema is also a ” successful” business man so he will so “win” in Zambia and become president! Four years down the line the great business man Upnd made their idol is a disgraced man in the US, and Upnd has stopped talking about him as Donald Hichilema! Most successful business men are crooks! And Zambians should open their eyes! Hichilema is just another crook as can be seen in the over ten years he has been at helm of his kantemba party, and the way he acquired his wealth. By the way no…

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  21. I cannot see any single solution to our current problems being proposed by UPND above!!
    A lot of internal and external factors are at play,hence our kwacha weakening(mostly due to reduced production of goods by companies) and increased inflation.
    I agree with raised issues concerning the current economy.However,just like many readers here,i anticipated to CLEARLY SEE UPND’S ANSWERS TO THESE OBSERVED PROBLEMS!Sadly,i got zero solution.This is why majority Zambians fail to connect with UPND because they simply offer NOTHING!!
    Late Michael Sata used to offer vivid solutions to problems caused by MMD Govnt,hence voting for him in 2011.Unfortunately,HH’s UPND have no convincing message!!!Look at the above stated article-IT CONTAINS ZERO SOLUTION!!

  22. No wonder they keep on losing elections…..who wants to be shingad butter….looks like the economy will be worse under UPND

  23. Fyabufi ifyo. If he can’t even help his tribes mates, how the hell is he going to do that in a country of diversity. Just continue eating his money because Zambians are not stupid. Mwabeja Basa.

  24. @3 How will UPND implement “Zero tolerance of corruption will be a departure from…”, when the driver himself is so corrupt and corrupted by the west in exchange to minerals? Muli bama jokes baice.

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