ZAMBIA’s economic performance during the first quarter of 2014 has had a mixed performance direction that has raised concerns as to which track the economy is taking, Jesuit Centre for Theological Reflection (JCTR) says.
JCTR programme coordinator Geoffrey Chongo said the performance of the economic during the period in question has seen developments in the financial market that might derail the country’s economic growth.
“The concern comes in the wake of two slowly emerging negative indicators namely the gradual and yet steadily increasing inflation rate and spiral freefall of the Kwacha,” he said.
Mr Chongo said if the trend remains unresolved, it may discourage investment, reduce economic output and further compound unemployment and poverty challenges.
He said while Government has continued to register positive gross domestic product growth, other macroeconomic indicators have not performed well and in the long-term even the economic growth the country is experiencing might decline.
He said increasing inflation and depreciation of the local currency are pointing to the downward thrust mounting pressure in the national economy.
“The depreciation of the Kwacha, particularly against the United States (US$) dollar implies that producers who purchase most of their industrial inputs by way of importation will correspondingly continue shifting the ‘dead weight-loss’ to the consumer who will end up shouldering the burden,” he said.
Mr Chongo said the status-quo will continue exacerbating the inequality between the rich and poor, between urban and rural dwellers.
He said there is need to undertake a deeper reflection on political and economic realities contributing to the current rapid and steady Kwacha depreciation and increasing inflation.
Mr Chongo said the scenario in which the Kwacha is now classified among the worst currency performers in the financial market is not healthy to the country’s profile and the market panic regarding the local unit need to be addressed decisively to build back the confidence in the local currency.
“Provided the supply of US dollars on the Zambian market is constantly evaporating without a corresponding dollar supply on the local financial market, the Kwacha is headed toward a continued downward spiral. This has a corresponding inflationary effect on the economy,” he said.
Mr Chongo said right now, there is no precise telling where the Kwacha will be in the months to come as the local currency continues losing value against major world currencies.