Eastern Province Patriotic Front (PF) Chairperson Lameck Mangani has expressed disappointment with organisers of the just-ended constitution provincial prayer meeting for not extending invitations to his party and Government officials like they did with other political parties.

Mr Mangani wondered why some political parties from opposition were invited to a prayer meeting held at St Atanazio Catholic Church in Chipata on Saturday.

“I am wondering how come these people (organisers) failed to extend an invitation letter to me on including provincial minister (Mr Malozo Sichone) to attend the function. If they invited UPND, MMD and other political parties why did they hide,” he said.

Mr Mangani said he was saddened with the trend from Civil Society Organisations (CSOs) for wanting to pressurize Government over the constitution.
And Mr Sichone said it was also good for the church to pray for the Government.

But Zambia Episcopal Conference (ZEC) representative Fr Jacob Zulu said the Catholic Diocese of Chipata shall going to use all its structures to force Government to release the constitution.

Fr Zulu who is also Diocesan Communications Director said the people of Zambia have been waiting for the people driven constitutional for a longtime.

“We are going to use all our structures in the Catholic Diocese of Chipata to force Government to release the constitution. We want that document now,” he said.

UPND vice president Dr Canisius Banda used the platform of prayer meeting to achieve the party goal of campaigning towards his party.

MMD acting national secretary Chembe Nyangu said the patience of the people of Zambia has run out especially when one considers that the Patriotic Front (PF) was the only political party in opposition n to have agitated for a people driven republic constitution.

Mr Nyangu who was accompanied by presidential spokesperson Muhabi Lungu and Chipata Central Member of Parliament (MP) said the PF showed their commitment to the cause by undertaking to deliver a people driven constitution in 90 days after assuming office.

He said the MMD condemned the British High Commission for what he alleged that insinuating that Zambia already has a functional constitution.

Speaking at the same function, Provincial Civil Society for Poverty Reduction (CSPR) coordinator Maxson Nkhoma said CSOs in the province were demanding the release of the people driven constitution.

A number of political leaders, CSOs and the churches took advantage of the prayers to issue different solidarity messages to the people.

Denial

There is a very distinct difference between a good and a bad finance minister. A good finance minister will keep his nation informed about the true state of the economy and prepares public opinion for adoption of appropriate policy measures to keep the economy healthy. A bad one, on the other hand, misreports facts and silences the public into believing that all is well until the economy crumbles.

In his maiden state of the economy address since the PF came into power, Finance Minister Hon. Alexander Bwalya Chikwanda (ABC) today (20/03/2014) painted a picture of the economy that faintly resembles the economic conditions prevailing in the country. Mr. Chikwanda painted a picture depicting that aside the exchange rate, ‘all is okay’. If ABC did not have any training in economics or lacked access to the latest economic data or indeed lacked well trained economists as advisors in the Ministry of Finance and Bank of Zambia, perhaps he could be given the benefit of the doubt-but no, he is an economist by profession and has access to all economic statistics and a multitude of brilliant economists at his disposal. So why is he downplaying the true state of our economy?

Mr. Chikwanda stated that “the nation has continued to post favourable economic outcomes”, that “the economy has remained strong and stable” that the Fitch rating of B reflects “reflects the positive strides that we are making as a country”, that the fall in the exchange rate is due to “cartels in the banking sector” and that the “Government is firmly in the driving seat to steer the economy of our beloved country to greater economic prosperity.”

Facts on the ground

The finance minister’s assertions are contrary to the facts on the ground. We are not sure which economy he was referring to because contrary to his assertions, the reality is that economic fundamentals have become very weak under his watch and the economy, on its current path is headed for greater disaster.

Mr. Chikwanda inherited an economy with Fitch rating of B+, and has downgraded it to B, how can he surely fail to interpret that this implies a poor performance when compared to the MMD era? The exchange rate is at a record low, deficits and debts on record high-how can these be indicators of a strong economy? Are these the positive outcomes he is referring to?

[pullquote]domestic and external borrowing in under three years of PF will soon be more than the borrowings of all the previous government’s 20 years put together[/pullquote]

Let us be true to ourselves. The budget is out of control with a higher than planned deficit of 6.7%. The Minister attempted to downplay the IMF’s deficit projection of 8.3% against the government’s estimate of 4.3%, but then, the actual deficit is higher and close to the IMF’s figure—yet, he still lives in denial that he was off-target.

The last inflation statistics are slowly showing a rise, public-sector debt has reached unsuitable levels and the exchange rate has depreciated faster and reached levels never seen in the history of Zambia.

Clearly, even an ordinary person would say that the economy is in bad shape. One need not be an economist to know that the price of essential commodities is on the rise. We don’t need to be economists to know that the cost of housing will be higher with the 10% property transfer tax he introduced, the highest in the region if not the entire continent. The economic conditions of an average family have become worse due to rising prices, large-scale unemployment, high transport costs and electricity—yet he claims the economy is getting stronger?

With all this, it is really painful shocking that the Minister of Finance of our country cannot see what people are experiencing in their daily lives and he seems to fail to correctly interpret economic statistics.

Our Economic problems due to PF’s governance style

Let us face it, our economic problems were not visited on this country by some cruel act of God or forced onto us by nature. These are man-made problems created by the PF and its approach to governance, economy and political.

The domestic and external borrowing of the present government in a period of just under three years will soon be more than the borrowings of all the previous government’s 20 years put together. The current government has borrowed and continues to borrow too much money. Borrowing too much is the cause of Zambia’s problems, not the solution. And these problems will affect our future generations. The government thinks you can borrow without regard to ability to pay, and spend carelessly on by-elections and bloated governance structures without regard to value for money, tax payer’s money and without regard for the serious needs of the country.

This government has taken the deficit in its current operations to a level never seen before in just under three years. With total debt to GDP ratio of 31.3%, and domestic revenue capacity of only 20% of GDP, surely we are living far beyond our means. The government is set to establish a new record in excessive borrowing from the commercial banks to finance fiscal operations with the recent upward adjustment to borrowing.

The plain reality is that the government is unable to generate enough revenue to meet any of its planned expenditures. Consequently, all debt-servicing and debt repayments, and all development expenditure is soon to be financed through borrowing, creating the classic situation of debt trap—borrow to pay debt, fail to move out of debt, leading to HIPC(Highly Indebted and Poor Country).

With lagging revenue generation from the ZRA, the amount of domestic bank borrowing is bound to accelerate in the remainder of the year, and subsequent years. This will not only result in further pressure on the BOZ’s reserves and the exchange rate but also hurt private-sector investment, the very engine of growth.

Hon. Chikwanda seems to be adopting a lay back approach in his speculation that “cartels” in the banking sector are responsible for the falling exchange rate. Again, if he had not studied economics, I would have forgiven him, but I cannot. His assumption is that the exchange rate is being driven by manipulation by banking cartels. At this point, let us ask him, what then is the BOZ doing about this? Isn’t it the role of the Bank of Zambia to ensure prudential financial sector stability and competition? Why would an entire Ministry sit back and let the kwacha depreciate when the “cartels” behind it are known? The minister seems to be speculating here, and his assertions are uncorrelated with the work of the BOZ. Again, this is a clear case of living in denial and failing to take responsibility for the inconsistent policies.

Revoking SI33 and SI55

That said, let us commend Mr. Chikwanda for revoking the SI33 and SI55. I don’t really fully support SI33’s reversal, as it will, in the case of a worthless kwacha erode the confidence in using the kwacha and lead to dollarization, the case of Zimbabwe. The legal tender status of the kwacha must be emphasised. However, perhaps this is a good measure in the interim. On SI55, why did you even introduce it the first time? On this one, I hope some tabloid and individuals with vested interests will not issue unsubstantiated statements lacking a clear understanding of the economy demonising this move as was the case last time. I hope HE.MCS will not reverse this too like he did the last time, we need consistency, please.

As we conclude, let us remind ourselves and our Hon Minister that proper treatment of the sick economy such as ours will first require an acceptance, not denial that it is sick, followed by remedial measures such as a sharp cut in the budget deficit and initiation of export-led growth through structural reforms. Finally, let us all commend Mr. Alexander Bwalya Chikwanda, for taking the courage to address the nation on such an important matter. This is indeed a breath of fresh air noting that it is the first of its kind since 2011 that a government leader has had the courage to address the nation and face the media. This is indeed a good move, and may raise the confidence required in our economy.

By Hjoe Moono

World Bank Group Country Director for Zambia, Malawi and Zimbabwe has said that the World bank is happy to note that the Government has taken action to revoke SI33 and SI55. In a statement released to the media today, Dr. Kundhavi Kadiresan said that the revokaction signaled that the Government values consultation with the private sector on important policy changes.

Dr Kadiresan said that the Zambian economy had recently gotten into a difficult situation with a large budget overrun in 2013 and increasing uncertainty about economic policies and direction, adding that this difficult situation was partly reflected in the rapid depreciation of the Kwacha and accompanying sense of panic in the markets.

“The recent action will enhance public confidence in policy-making. The Government has also re-iterated its commitment to stay within the 2014 budget and move towards lower fiscal deficits in the coming years. This is going to be hard, considering the large wage award from 2013, the still uncertain direction of the wage bill trajectory, and the ambitious capital investment program,” read the statement.

Dr Kadiresan concluded by saying that the PF Government has made politically hard but economically sound decisions in the past such as those related to reduction of fuel and maize subsidies and hoped that the Government will build upon these positive actions.

And he Chamber of Mines of Zambia has to expressed its appreciation on the pronouncements contained in the address by the Minister of Finance, Honourable Alexander Chikwanda.

In a statement released to the media, the Chambers president Emmanuel Mutati said that the Industry welcomed the revocation of Statutory Instrument (SI) Number 33 of
2012 and Statutory Instrument (SI) Number 55 of 2013 and government’s willingness, as is already the case, to continue consultations with the private sector to develop a regulatory environment that is supportive of government’s agenda and conducive to increased Foreign Direct Investment.

Mr Mutati concluded by saying that the Chamber and its members looke forward to working with Government to enable the mining sector contribute to increasing employment and economic opportunity in the country.

Earlier today, Finance Minister Alexander Chikwanda revoked Statutory Instruments numbers 33 and 55 of 2012 and 2013 respectively, to allow for further consultations amidst the free fall of the Kwacha which had depreciated by up to 13 percent since last quarter of 2013.

Mr Chikwanda has since described the free fall of the Kwacha as temporal saying the factors that were affecting the current exchange rate were domestic and external.

Mr Chikwanda said Government had decided to revoke the two SIs, which were meant to support the implementation of monetary policy to allow for further consultations.

He said Government, in consultation with other stakeholders will look at other veritable options to protect and safeguard public interests.

He said Zambia’s economy had remained strong and stable with a real GDP growth preliminary out turn at 6.4 percent and the economy had grown at an annual average rate of 6.9 percent since 2011 when the Patriotic Front Government assumed office.

Mr Chikwanda called for intensified efforts aimed at enhancing Zambians’ participation in the economy.

He said the current depreciation of the currency did not necessarily imply a weakening of Zambia’s economic fundamentals and Government would not use the foreign reserves to redeem it.

“The weakening in the Kwacha parity is temporary and Government will not be tempted into interventions that may just end up affecting our reserves as doing so will only artificially stabilize our exchange rate and make us more vulnerable in case of continued volatility,” he said.

He said Government would in the long term increase the country’s resilience to shocks by accelerating the diversification of the economy away from Copper to ensure resilience to global financial shocks.

He called for the expansion of the productive capacity by investing in infrastructure development.

“Our transport network and energy supply need to expand to support private sector growth and lower the cost of doing business. We also need to invest in our education and health infrastructure and staff so that we build the people,” Mr Chikwanda said.

He admitted that 2013 was a challenging year which resulted in the fiscal deficit increasing from the planned 4.3 percent of GDP to a preliminary outturn of 6.7 percent.

He said Government would from henceforth diversify from Copper into manufacturing, education and agriculture.

Government would also aim at reducing the wage bill in the public sector by harmonizing salaries to ensure there is equal pay for equal work.

“Government will also maintain debt sustainability to safeguard macroeconomic stability,” Mr Chikwanda said.

The SI 33 of 2012 recognises the Kwacha as legal tender in Zambia and prohibits dollarization, which is the use of any other currency to quote for prices or to demand payment of any services or goods.

Bank of Zambia (BoZ) Statutory Instrument (SI) No. 55 of 2013, empowers the Bank of Zambia (BOZ) to put in place measures for monitoring all transactions that involve the sending and or receiving of funds. The main objective is to monitor balance of payments in a transparent and accountable manner.