HAS UPND STARTED WORSHIPPING IMF? THE REMOVAL OF FUEL SUBSIDY WILL HAVE A NEGATIVE IMPACT ON THE ZAMBIAN ECONOMY ®
In 2013, the late president Michael Sata removed subsidies on maize, the result was suffocating to both farmers and end users. The price of 25kg jumped from K55 to K65. Micheal Sata defended the move saying government would save about $200 million from this removal of subsidies. It was during this time when Kwacha jumped from K5 to K6 against $1. Today, the new dawn government announced that subsidies on fuel will be removed but refuted claims that price of fuel will increase. This was on a live radio program 👉
While this debate is on-going whether price of fuel will increase or not, yesterday BOZ announced increase in monetary policy rate to 9%. I explained that the increase would result into prices of commodities to increase, some cadres from both UPND and PF, especially from UPND attacked me heavily, until today when the newspapers have carried similar headlines about Denny Kalyalya supporting the idea of increasing fuel, electricity tariffs.
On the international market, the price of fuel is fair, but the US who are the largest consumer want to increase the price. This is same with UK and other surrounding regions. Let me state that increase in fuel price in US should not cause us to increase of fuel, as our demand and consumption. Secondly we don’t procure fuel from US, so someone must not start making justifications for nothing while in many countries the price of fuel remains the same.
So, Kalyalya wants fuel to increase, while UPND clarified that fuel price won’t increase. This is pure mind game, because we all know that removal of subsidies will automatically cause increase in fuel. This call by Kalyalya will be justified by removal of subsidies and result in drastic changes in the Zambian economy. Should we say IMF is doing alot of damage to the country?
What are the consequences of increasing fuel pump price and removing subsidies?
Subsidy removal, without spending the associated savings, would increase the national poverty level. This is due to the consequent rise in the cost of inputs relative to the selling prices of products sold by most firms and farmers. The key commodities which experience nominal output increases are refined petroleum products, production of which provide income for an extremely small number of households, worse yet Zambia relies on copper alone.
The inflation resulting from subsidy removal can be considerably reduced with a conservative fiscal policy response. In this case, inflation comes from two sources: the initial increase in general prices due to the higher cost of fuel and more spending by the government as funds are freed up. Therefore, if UPND’s goal is to reduce the inflationary effect as Kalyalya is saying, the government will want to keep spending to a minimum, focusing on areas that can increase the country’s productive capacity.
By contrast, a highly expansionary policy of spending all savings from subsidy removal would favour rural households while increasing urban poverty. There are some many wasteful projects left by PF that government can cut cost from than touching on subsidies. The removal will result into high inflation rate, urban poverty, high transportation costs, high cost of doing business, and high price of products and services.
What are your views? Don’t worry cadres are welcome to say something, it’s thier social media right. 😆