Some of you have been pressing for a comment on the recent macroeconomic developments. You have been emailing, posting and wondering why Zambian Economist has not yet commented on the sharp appreciation of the Kwacha from K7.1 two weeks ago to K6.3 today.
FIRST, the Zambian Economist is not a standing advisory committee on Zambia’s economic fortunes. It is a “hobby project” that is currently led by a single person, and supported by two or three technical experts who regularly offer suggestions on its strategic and analytical direction. This means that there’s a serious limit on how many posts can be written. We have always made it clear that those who love Zambian Economist should look to support it financially if they want it to be more regularly updated and self sustaining. Repeated requests for advice without support are therefore hollow.
SECONDLY, it is wrong to say that the Zambian Economist has not commented on the Kwacha appreciation because we have shared three cardinal updates : the recent IMF statement on Zambia; Ministry of Finance Press Release; and, the Bank of Zambia Governor Statement that explained the GRZ assessment of how the tightening measures are currently working. We believe these three documents do well to explain where we are and allows the public sufficient information to debate on the future direction of the Kwacha.
THIRDLY, it is important to allow time before fully analysing the Kwacha. The Kwacha has only appreciated in the last week. Currency markets are always volatile and we wont know how stable the currency is for some time. It is therefore prudent to wait and see which way the wind is blowing. Only fools rush in.
FOURTHLY, it is important to keep the eye not just on the Kwacha but also the BOZ policy instruments. The recent tightening measures by PF have come through increased reserve ratios, higher interest rates and other restrictive practices. PF of course continues to borrow heavily domestically. The combination of all these policies is that we are seeing an acceleration of the crowding out private sector borrowing and make it even more difficult to bring down the cost of borrowing for ordinary Zambians. More debate around these implications is therefore needed. Not just on the Kwacha appreciation.
FIFTHLY, we have always made it clear that the problem with the Kwacha is not its level, but its stability. There are significant competitive benefits to a weaker currency. The problem is stability. Therefore the recent sharp appreciation [too early to say whether it will last] is just as bad as the sharp depreciation. We have made it clear that what the Sata government needs to do is lead politically by explaining to the public what most non-economists will struggle to understand. Namely, a weak but stable currency is “potentially good” for a developing country provided it is accompanied by a strong diversification policy that improves competitiveness and transforms the country.
The Sata administration needs to accept that PF was wrong to champion a strong Kwacha at all costs during the elections. It is also wrong now to keep insisting that the Kwacha must be strong at any costs. And most importantly he needs to realise that there’s an opportunity here. If we can have a stable but weak Kwacha, it can open a window of competitiveness for non-mining sectors especially agriculture, tourism. The real question is whether PF has new policies to radically diversify the country to take advantage of this window.
Most important we have made it clear that using the current “weak Kwacha window” to encourage more diversification requires money and a proper synergy between politics and economics. Money has been routinely wasted with borrowing now going on maintaining public sector wages. The politics and economics appear bankrupt. To remedy this we have called for a “new choir master” at the heart of PF’s economic policy. We also believe there is a need for a complete rethinking of our economic policy. The President needs to appoint a new independent economic commission that will come up with new policies to guide Zambia forward.
FINALY, the Zambian Economist always encourages Zambians to realise that there’s more to Zambia’s development story than the latest story of the day! We want to encourage you to keep thinking broadly on many major issues. To give you a flavour of the issues :
Zambia’s agriculture policy is currently a mess;
The aid programme to Zambia by donors needs urgent reform:
Our expensive infrastructure programme is not evidence based;
We don’t seem to have a coherent regional economic policy;
Cost of doing business remains high;
Many of our children have no future;
China is forever increasing its economic colonialism in Zambia;
Civil-society influence is diminishing;
Corruption remains high;
Tradition and culture is not sufficiently synced to development;
Government borrowing is rising high;
We have no population or demographics policy;
No diaspora policy;
Education levels remain poorly managed;
Electoral competition is weak and poorly administered;
Prices of electricity are going up daily;
Zambia’s environmental policy is captured by mining companies;
Fiscal policy is poorly managed and non-consultative
We have no adequate fishing policy despite huge water resources!
Our foreign policy has no read across to economic outcomes!
Gemstone industry is still unregulated
We have poor local governance thanks to poor councils
Health system remains deplorable;
History is not properly taught and lessons are not being learnt!
Too many Zambians have no proper roof on their head
Inequality is forever rising;
The state of our justice system is a complete shambles;
Government has no coherent information policy;
Labour policy is non-existent;
Large sections of the media remain state controlled;
Zambia is still getting very little from her mineral resources;
All parastatal companies are filled with party cadres and poorly managed;
Our politics is out of variance with economic policy;
Poverty levels are still at historic levels;
Urban planning is a complete shambles;
The list of topics for discussion is endless…