BOWMAN LUSAMBO’S CRAZY EXPLANATION ON THE COLLAPSE OF THE KWACHA
It was astonishing to see a cabinet minister on Muvi TV give a crazy and senseless explanation on the collapse of the kwacha.
It’s also frightening to see the caliber of people that are governing this country, people that don’t understand the basics of governance and economics.
Bowman Lusambo said that the kwacha has depreciated because the government is importing fuel and agricultural inputs for the farming season and therefore paying out dollars.
How does that even make any sense?
Zambia has been importing fuel and fertilizer for decades, why didn’t the currency depreciate then? Why now?
In fact international oil prices are their lowest in over 20 years, the government should be spending less on fuel and passing on the benefits to consumers by reducing the pump price.
Let us give him the real reasons why the kwacha has lost value.
1: EXCESSIVE NATIONAL DEBT – President Lungu has borrowed too much. Zambia’s debt is now at almost 100% to GDP. The debt repayment figure it too high and every month the government is sucking out more and more dollars to repay debt. This is reducing the supply of dollars in the country and causing the kwacha to lose value . Every month taxes collected by ZRA have to be converted from kwacha to dollars to pay debt.
2: CORRUPTION – Alot of the borrowed money is being stolen by government leaders instead of investing it in income generating activities. We have over borrowed and part of that is a corruption premium for inflated project costs.
3: MINES – The inflow of dollars from the mines has always been a stabilizing force for the kwacha, ever since the cadres took over KCM production has slumped over 50% and the inflow of dollars into the country has reduced substantially.
4: LOSS OF INVESTOR CONFIDENCE – Investors are pulling out of the country due to bad economic management and political instability and they’re taking their dollars with them. No one wants to invest in a country where their investments are not secure, or where the government changes tax rules every year.
5: DEPLETED BOZ RESERVES – The Bank of Zambia is broke, all of the money in the reserves has been utilized to pay debt. With no dollar or Gold reserves at BOZ, the kwacha has nothing to back it up, it becomes a worthless piece of paper. Market speculators who are holding dollars will not change them to kwacha and will keep profiting off the depreciation because they know that BOZ has no tools left in the tool box to intervene, they have no dollars in the reserves to offload onto the market and quench this depreciation fire.
They often claim that we don’t give them solutions, here are the solutions ;
1: Stop borrowing
2: End Corruption
3: Let the mines be run professionally and free of political interfere so that they can become productive and profitable and in the process increase the inflow of dollars into the country.
4: Zambia needs to be transformed from an import driven economy to an export driven economy through the creation of manufacturing industry, that will mean less dollars going out of the country and more dollars coming it, it will also insulate Zambians from inflationary price increases due to currency instability.
5: Let a substantial amount of the gold in Zambia be held at BOZ reserves to back up the kwacha.
6: Negotiate an IMF bailout to get lower interest rates on the national debt and have the debt repayments spread over a longer period of time.
7: Give good incentives in the firm of tax breaks to both local anf foreign investors who chose to set up manufacturing industries here in Zambia. That’s the only way to attract them to come.
8: Disallow the importation or impose tarrifs on certain goods into Zambia where we have Zambian companies that produce similar goods locally.
This is the only way the economy will stabilize, the kwacha can gain strength and jobs created for the youth, there is no other way.
Copyright @ NDC MEDIA