Saturday, June 22, 2024

Kwacha’s Rapid Depreciation: Sean Tembo Criticizes HH and his Economics Team

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President Hakainde Hichilema and his economic tag team at the Ministry of Finance are being criticized for their handling of the exchange rate of the Kwacha against major convertible currencies, especially the US dollar. The PeP President, Sean Tembo, has weighed in on the issue, accusing the government of causing instability in key economic variables, thereby hindering the attainment of sustainable economic growth.

In a post on his Facebook page, Tembo highlighted the importance of stable economic variables in achieving economic growth. “Out of all the parameters that are needed for an economy to grow, the most important is that economic variables must be stable. These economic variables include the exchange rate of the local currency to other major convertible currencies, the price of key factors of production such as fuel and electricity, etcetera. For as long as there is instability in key economic variables, you can forget about achieving any sustainable economic growth. That is a well-established fact of economics which every decent economic manager the world over knows, apart from President Hakainde Hichilema and his economic tag team,” said Tembo.

According to Tembo, the rapid appreciation or depreciation of the Kwacha against major convertible currencies such as the US dollar is detrimental to economic stability. “For purposes of economic stability, a currency must not rapidly appreciate or depreciate. Otherwise, it causes uncertainty to economic entities and forces them to postpone the making of certain economic decisions. An economy like ours here in Zambia is made up of millions of economic entities. What allows an economy to grow is the ability of economic entities to make economic decisions,” he added.

Tembo also highlighted the negative consequences of instability in economic variables. “If Mrs. Bwalya had planned to buy a car from South Africa this month-end, but due to the rapid depreciation of the Kwacha, she is forced to postpone her purchase, it means that the car dealer has lost out on a potential profit, the government has lost out on revenue from customs compliance procedures at the border and registering the car at RTSA, an insurance company has lost out on potential premiums, a filling station has lost out on potential profits that would have accrued by selling fuel to Mrs. Bwalya, the bank has lost out on potential bank charges that would have accrued when Mrs. Bwalya made the payment for her car, and so on and so forth,” he explained.

Tembo further pointed out that instability in economic variables has ripple effects on the entire economy, leading to a reduction in demand for goods and services, loss of jobs, and ultimately hindering economic growth. “When the economy is stagnant, it means even Mrs. Phiri who sells beans and kapenta at Chaisa market will suffer because there will be less demand for her products as the general population will have reduced purchasing power. Hence the general saying; ‘buzinesi yavuta masiku yano’. But not only that, when the economy is stagnant, even Mr. Mukelebai who had a job as a security guard may be laid off because the owner of the lodge where his company was guarding has decided to reduce the number of guards from 5 to 3, in order to cut costs due to a generally poor business environment. All these economic consequences are ripple effects of the instability in economic variables such as the exchange rate,” he said.

Tembo also criticized the government’s decision to pump US$1.3 billion to support the exchange rate, which led to a rapid appreciation of the Kwacha against the US dollar. The Deputy Governor of the Bank of Zambia, Dr. Francis Chipimo, revealed that the Central Bank had pumped in the money to support the exchange rate. Tembo criticized the move, arguing that the government could have just maintained the exchange rate at about K21.00, where they found it, to ensure stability and preserve the country’s forex reserves.

“Why did the government decide to spend so much of our forex reserves to achieve a huge appreciation within a short period of time, ” he asked.

In conclusion, Mr. Tembo advised the government to prioritize economic stability and urged President Hichilema and his economic team to revise their economic policies to ensure sustainable economic growth.

21 COMMENTS

  1. Many of the world’s poorest economies have been hit hard by higher food prices as a result of the war in Ukraine World Bank Report.

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    • Okay the PF were thugs but when the economy started to go bad due to COVID-19 Upnd and gang refused to accept it and called it a lame excuse. They also mentioned countries that flourished during the pandemic. Here are now still with excuses from the most intelligent administration.

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    • The war is between the West and The East not Russia and Ukraine. The West can stop encouraging the war and it will be over. The West provoked the war now they dont know how to handle it because even their sanctions arent working. The war is creating two world economies. NATO-led economies against BRICS economies and both wont survive healthily if sanctions continue

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  2. What commodity do you have to back up your currency as a country for example Britain have gold reserves that is why their pound is strong also the country is industrialized and you as Zambia what do you have nothing. You are just at the mercy of other countries because of your poor Policies and poor leadersship every time your leader speaks is about borrowing you fail to create your own wealth with so much resources at hand. What a shame.

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    • Unless you haven’t been following world economic trends the pound is no longer a strong currency. Since brexit it has lost nearly 50 percent of its value and its still losing.
      And Currencies no longer rely on commodities in the digital ec world
      Banks create values and we should be skeptical of such. That’s why the US has a debt in trillions. What’s backing that up?

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  3. Did you say You_Pee n_Dee have an excuse? China.
    They claim China is NOT ready to guarantee debt restructuring at
    Paris Club.
    We are short of blaming the West, who have invested the three Euro bonds Zambia issued.

    Must Zambia fold hands helplessly watching the Kwacha fall over the cliff? Looks like we are out of options.

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  4. PF are the ones who hoarded USD and they are the ones who are happy with the current situation…You Sean Tembo might have also received a huge dollar pay out from PF before they lost the elections which is why you want a gradual appreciation or rather the Kwacha to remain as it is. No we the majority who have saved our pensions in T. Bills and fixed Deposit savers accounts want a fast appreciation we want the USD to be at K15.5 back to where it was 5 months ago. I’ve always suspected PF and it’s cronies of being happy with the current exchange rate situation and now I have confirmed it. You are no good to this nation Mr Tembo, you don’t mean well

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    • Just solve the problem. You mean PF is so strong that they are able to run the nation from the back bench? Then you must be hopeless.

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    • I hope such pepople, trapped in cob webs, like 2020_Vision are not true representatives of the Neo-Dawn. Otherwise, we are headed nowhere with these narratives of a warped minds.

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    • I’m not UPND though I voted for them but previous two elections I voted PF as many did that later changed their thinking and thus opted to give HH a chance to rule, I’m a Zambian that is able to analyse things. I refuse to be blindsided by the likes of Sean Tembo. Was he privy to the terms of how those funds were to be disbursed? What nonsense is he saying? You don’t seem to understand how us pensioners have been affected by the steep depreciation and then some plunderer comes and says the Kwacha should appreciate slowly does he know how we have lost on the spending value of our savings due to the exchange rate? Only those who hoarded USD from plundering are happy and those fingers point to PF and their cronies.

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    • Most times you are very objective. But on this one, you got it all wrong.

      Even if the Kwacha is buying a dollar at K100, it is of no consequence. Sharp valuations and devaluations in the currency are very detrimental to a country’s economy. It negates proper planning. Just like the monthly fuel udjustments are a menace, SHARP changes in FX are unwelcome. Because the commentary is coming in from “Shawn”, then you must shoot it down is irresponsible.
      Importers benefit when the local currency is weak, like Mrs Bwalya; exporters complain about it being strong. The money hoarding arguments are misplaced too.

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    • @Mulonguti are you Sean Tembo? If you are or aren’t let me say this I have been more correct on most of the subject matter that I have been commenting on this news site for now over 10 years. One thing I will tell you is Sean Tembo is the wrong chap completely…nothing he says can be taken as a genuine statement without an intended kick back from somewhere, these are the people that ECL surrounded himself with and being a weak mind was easily hoodwinked into running this country into the ground with debt and extravagant expenditure of luxury SUVs that served no purpose whilst pensioners were left to que up fight inorder to get their hard earned benefits.

  5. Pumped in $1.3 billion with expectation that they’d soon have debt restructured
    Man, are they disappointed!

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  6. Pumped in $1.3 billion with expectation that they’d soon have debt restructured
    Man, are we disappointed!

  7. 2020 Vision. Change your name to something else. Since 1994 Zambia has never experienced shortages and long queues of mealie meal. It’s shameful that with the bumper harvests we have had a situation like this returns to haunt us. Don’t lie that you are not Upnd… there’s no shame in belonging to a party of one’s choice.

  8. tembo just create an industry so that you contribute and increase exports and that way the kwacha relatvely appreciate. But you are just busy creating and discussing lies about homosexual issues. kamara came with her husband, ou vice president was wih her husband, president hh has a good wife, biden has a wife. but ba pf are always busy creating and discussing homosexual ,,,, instead of doing businesses to make kwcha appreciate

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    • Well said and this is where I fail to understand why they are more focused on nonsense such as gay rights than the economy and discussing key issues such as the depreciation of the Kwacha. Sean Tembo comes and starts yapping about fake economic theories and assumptions because they are the ones who run off with millions of dollars which the Chinese burrowed from us many years ago.

  9. @Mulongoti Machayi
    When the Kwacha weakens, this increases revenue for exporters and increases costs for importers and vice versa. Every country must have a strategy on the exchange rate. In the case of Zambia, in the short term it requires a strong Kwacha to deal with the cost of production since most firms are importers. In the Long term ,hopefully, we can develop our export base then a weak currency would be desirable.

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