Terminating Dr Denny Kalyalya’s contract as Bank of Zambia governor is not a solution but recipe for the exacerbation of problems.
And South Africa’s Minister of Finance and former Reserve Bank governor Tito Mboweni’s reaction to the firing of Dr Kalyalya sums it up very well, “No. That Governor was a good fella. Why do we do these things as Africans? The President of Zambia must give the reasons why he dismissed the Governor or else hell is on his way, I will mobilise! Presidents in Africa must stop this nonsense of waking up in the morning and fire a Central Bank Governor! You cannot do that. This is not some fiefdoms of yours! Your personal property! No!”
Terminating Dr Kalyalya’s contract at this time is a very big mistake and it will lead to very serious macroeconomic instability.
Dr Kalyalya gave a lot of credibility to this otherwise very unstable macroeconomic situation.
As Dr Cosmas Musumali aptly puts it, “Dr Kalyalya and his BoZ team were the opiate doses for a critically ill Zambian economy. Beyond a certain level of pain, opiates and other painkillers are ineffective. The patient is then exposed to excruciating pain and death.”
It shouldn’t surprise Zambians if stories of them printing money start flying around. Once on this path, there was no return to sanity – crazy things will happen. That is the only way left for them to face next year’s elections. Monetary policy tools have been rendered irrelevant to mitigate the impact.
And as Dr Musumali correctly observed, “There’s no doubt Dr Kalyalya is by far one of Zambia’s finest economists. He understands the potency of monetary policy tools but is also clear about their limitations. Much more important, he is a sober and objective personality. These are qualities lacking in most Zambian economists. His appointment as Bank Governor was always seen as a panacea to the otherwise misinformed and rogue policies of President Edgar Lungu’s regime. However, it was just a question of time as to when frustration would set in. Ironically, President Lungu lost the patience instead. The President wants to win next year’s elections at all costs. Even if this means a total destruction of the Zambian economy. Dr Kalyalya therefore had to go. He had become a stumbling block in an evil machinery that is destroying the entire Zambian society and economy.”
The firing of Dr Kalyalya will certainly unleash a wave of unprecedented macroeconomic instability which will ruin any hopes of Edgar’s reelection. Edgar has in such a very short period of time destroyed the Zambian economy and consequently himself.
Dr Kalyalya was actually very reserved in his remarks. His removal is likely to backfire on Edgar, the Patriotic Front and its government. The economic situation is likely to get worse much faster.