Thursday, June 13, 2024

Reduced inflation cannot lead to reduced cost of living in Zambia minus increased production and exports-EFF

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Opposition Economic Freedom Fighters (EFF) Secretary-General Changala Siame has said reduced inflation and gaining kwacha cannot lead to reduced cost of living in Zambia minus increased production and exports.

Mr Siame said despite reduced inflation the cost of living will remain high because the prices of commodities will be increasing unless Zambia starts producing and increasing exports.

He argued that the Kwacha was only gaining because the dollar was losing value.

“It’s very important to understand fundamentals that cause economic trends. This gives a correct response on how to react to either a positive or negative economic trend. Fundamental and technical analyses are two common words used for those that trade on active stock markets. The two theories affect trader’s decisions to buy or sell stocks.

In Zambia, the strength of the Kwacha against the US dollar is something that brings a lot of excitement to international traders and indeed is used as an economic performance indicator by a common man on the street. However, without understanding why we have a gain or a loss, could lead to serious poor decisions by those who are actually involved in international trade, our local traders,” Mr, Siame said.

“What is interesting in our economy right now, we have a reducing inflation and a stable and gained exchange rate that is actually having less impact on the price of consumer’s goods. The cost of living is still going up and unbearable. In actuality, what is expected is the opposite to happen. A reducing inflation and a stabilizing and gaining currency should translate into cheaper goods but it is not our case. The reason is very simple; our gain in the Kwacha against the US dollar is because of the weakening of the US dollar. If you check the US dollar against the Chinese Yen and Rubles from Russia, you would appreciate our explanation. The UK pound; Euro and Dollar are certainly under pressure as the result of the Ukraine-Russia war. Russia is demanding that oil be bought from their currency, Rubles and not the US dollar. China, India and other countries are buying fuel cheaply from Russia and their currencies are doing fine,” he said.

Mr. Siame has since advocated an enhanced manufacturing sector in Zambia.

“What is happening now, the global economy is deeply divided into two spheres. The BRICS (Brazil, Russia, India, China and South Africa) against the West. Therefore, going forward, it would be very important to make comparisons of exchange against the emerging currency to determine the performance of the US dollar, especially against the Rubles. For Yen, it’s usually manipulated against the dollar. They always peg it down against the US dollar for cheaper export purposes. Therefore, the Chinese Yen is not a good yield stick for purposes of comparison against the US dollar. Our Kwacha has been relatively stable the past month and slightly the previous. Hence, any turbulence in major currency, translates in significant changes in Kwacha as witnessed. Because of our Kwacha gaining on those grounds, the cost of living will still remain high because the prices will still be going up unless we start producing and increasing our exports,” he said.

Mr. Siame added:”What the government should actually be concerned with are the reserves we hold in US dollars which is about $ 2.8 billion. This actually means losing value stored in US dollars. They really need to pay attention to what is happening in the global market and possess an understanding thereof to find correct response to this new development. Gold reserves will prove better and have always been better from time in memorial. Hence, with this positive gain that we have, not knowing how long it would last because the fundamentals are not as a result of our own efforts, the government should take advantage by encouraging our people to import manufacturing machines. This can be done through reducing tax duty on those items. Thus, this will create possibilities of creating manufacturing jobs in the near future. We hope the trend continues in our favor as a country. Wherever we want to go, our feet shall take us there.”

5 COMMENTS

  1. This guy really understands inflation, contrary to the minister of finance who clearly hasn’t got a clue.

  2. Fuseke. How much is hh paying you to defend his failures. Hh promised to reduce cost of living, today his coming up with every excuse under the sun. Do not insult our intelligence bafeeekamba imwe

  3. This guy knows very little the Russian ruble is worth nothing and the price of copper has tanked as has gold and other mineral’s because of less imports by china . the whole world may go into recession soon and the kwacha is a blocked currency which means it is not floated on the international stage but pegged by the bank of Zambia .At the moment the euro and pound has gone down against the dollar not up like he states..

  4. In the short to medium term economic forecasts that is risks could be skewed significantly to the downside that is why its important in addressing the core inflation measures and indicators to work industrial capacity utilization long-term because addressing inflation and making price stability could be a positive thing for the productivity of our economy long-term You should be also taking about total factor productivity Because the output GAP to effect Inflation measures down wards for long-term

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