Economy : Understanding the man called HH
The only way Zambia can achieve anything good economically is when spending is reduced through government expenditure and revenue collection is improved. Yet the only way to grow an economy is through increased spending.
Zambia is paying almost it’s entire revenue collection per month to debt service. Our debt ratio is over 100% to the GDP and what is recommended for an economy to be healthy is 25 to 35 % debt ratio to the GDP. Basically this implies that the more we live the more we are going in debt because of budget deficits.The pandemic and the Ukraine war just undressed us faster.
Example is what’s happening to most government institutions. They have monthly expenditure 600 but they only receive 400 to pay for their orders and contracts, so every month they accumulate 200 more debt. Thats the same issue at national level. I will be very careful supplying to government unless am UPND or have serious connections; they are basically stealing your money and killing Zambia business for them to survive.
President HH’s major solution is to engage the IMF. The IMF are coming to stop or reduce budget deficits so that debt is sustainable by reducing government expenditure. Further more to manage our debt so that it is reduced in the short period of time and finally offer relief for the time period.
They will come with tough conditions that will see our citizens grapple with hard-hitting structural reforms and prompt job losses. It will be a bitter pill to swallow. Debt ceiling will be immediately implemented; no more borrowing but you recieve a drawing from them. Goverment spending and business will be tight.
With less Government spending to grow the economy, HH is now desperate for investors. He is depending on foriegn direct investment to cover that gap. This is the reason he is pushing deals with mining companies to invest billion of dollars in the economy. We have FQM and Vedanta already pledging over $2.5 billion and Anglo American hinting to come back.
In short he is sorting the debt issue through IMF by restricting spending and replacing that lost spending with Foriegn investments. I don’t believe in the IMF, yet you can see it’s fairly an intelligent idea. My concern is there are no creative ideas or reforms to cure or grow the local businesses. For his plan to work there has to be some major business reforms like government paying on time, stop kaloba, cost of doing business, order Financing or cheap capital and prioritise contracts for locals.
You see what he is trying to do? We must also bring to his attention local business otherwise the economy will heal with foreigners but we shall be broke and just basically working for them. For example, if you give CDF contracts to poor citizens with no capital they will fail, even if they borrow the cost is too high and so they won’t make anything out of those contracts.
Tell HH ati see him lol
Nkonkomalimba Kapumpe