By Hastings Nasilele,
PRESIDENTIAL Spokesperson Anthony Bwalya says the removal of fuel and electricity subsidies will have a slight impact on the cost of living but the UPND government has put in place measures to mitigate that.
Speaking during Phoenix FM’s Good Morning Zambia breakfast show, Monday, Bwalya said if there would be an increase in commodity prices going forward, it should not be entirely blamed on the removal of subsidies.
“It is not entirely correct that the cost of living is going to rise because subsidies on fuel and electricity have been removed and here is why; from the year 2012 to where we are now, your average price of eggs has increased right? Your mealie meal has increased in price, right? Your average price of sugar has increased in price. Literally, everything has increased in price from 2012 to now.
Subsidies were on, so what was driving the change or the increase in prices? And I will give you this perspective, Zambia is largely an import dependent country, now these are facts, this is not politicking, anyone who knows economics should know this and now I am trying to explain it.
Zambia is an import dependent country, when your kwacha depreciates as much as it had done under the previous regime, as much as 230 percent over 10 years, then you are in trouble,” he said.
“It means that anything and everything that you are importing in the country for people to consume will be expensive. And that was the key driving force for the kind of inflation that we are seeing over the past 10 years, just a slump in the value of the kwacha against the dollar.
What was causing that slump in the kwacha against the dollar? Public debt. How? Because every money which our colleagues in the previous regime were generating in revenue needed to be converted into US dollars to feed the appetite to service public debt.
That was weighing on the kwacha, dollar exchange rate and that was driving inflation that was undermining growth. And this is why when you look at 2012 to 2021, your average food-related inflation had spiked from 6.1 percent in 2012 to 31.6 percent in August 2021, subsidies were on then.”
Bwalya said the removal of subsidies would contribute to a slight change in the cost of living but the UPND government had taken measures to mitigate that.
“Now the removal of subsidies, yes marginally it is going to contribute to a slight change in the cost of living but we have taken measures to mitigate that.
We understand that it is going to be tough and this is why we hastened to say as we remove subsidies there, let us make sure that we put 30,000 teachers on the job, let us make sure that we put 11,000 health workers on the job.
Let us ensure that we keep the promise of delivering to the local councils by giving them their local government equalization fund money which [we] have already started doing by the way, as well as clearing all CDF arrears to all 156 constituencies. As we remove subsidies, let us pay our retirees their pension benefits and let us make sure that our kids go to school for free,” he said.
“Let us also make sure that we support those vulnerable women and girls by making sure that they have free access to sanitary wear. That is progress and that is purely in recognition by this administration and the President that it is going to be tough for ordinary people before it gets better.
But at least now the Zambian people have the confidence that they have a government that is not sweeping the problem under the rug, we are not doing that. Already we are making progress; I have just explained that the kwacha dollar rate which we found at 23 percent, we have reduced it to 16.4 percent.
That is an improvement of 55 percent, which means that everyone that brings in goods in the country for you and me to consume no longer requires as much in their kwachas in order to bring in the goods, that is good for business. It also means that it should play out in the retail price that they channel to people.”
And Bwalya said Zambians would start seeing a reduction in the cost of living as soon as the government restores the integrity of the Kwacha.
“We are dealing with the underlying issues that undermined and made it difficult for us to make progress on driving down the cost of living for ordinary people.
The issue of debt is being dealt with. Already, away from having signed the debt service suspension initiative, we have now signed the staff-level agreement with the IMF that has paved the way and made it possible for us to aggressively engage with our creditor productively so that we can restructure how Zambia services her debt.
What that is going to do is that it is going to create excess capacity for us to now spend money in areas where it is needed the most because previously we just had no capacity. The issue of the fuel pump price will be resolved provided we make progress on maintaining or restoring the integrity of the kwacha,” said Bwalya.
“We will deal with the Kwacha issue and now you will begin to see that fuel at the pump progressively will start getting down because the kwacha dollar exchange rate is a critical component to what you pay at the pump. If we miss that, then we will be in trouble.
Unfortunately, the previous government for some reason did not quite understand the relationship between the debt and the kwacha dollar exchange rate and this is why the inflation was going off the roof and it seemed like nobody knew what the problem really was.
But now the Zambian people can be certain they have a President who understands that relationship. This is why we are dealing with the issues of that public debt and as a consequence, we have started to make progress on restoring the integrity of the kwacha and Zambians will start seeing the progress in the reduction of their cost of living.”