UPND on right track – Fundanga
By Bright Tembo
FORMER Bank of Zambia governor Caleb Fundanga says the UPND government is so far on the right track in changing the country’s economy.
Speaking when he featured on ZNBC’s Frank Talk programme on Thursday, Dr Fundanga said despite inheriting a messed up economy from the PF the new dawn government has so far shown it has what it takes to put the country on the right track.
Dr Fundanga, who served at BoZ during the Levy Mwanawasa administration, stressed the need of the central bank being free from political directives.
“When people talk of independence of the central bank, we want it to be free from political directive. Those are key towards creating stronger institutions which can resist when it is ordered to do something stupid,” he said. “It’s up to the politicians to choose to take that root or sometimes to go and pick up the phone and say ‘I want you to do this…’ I am very confident that the government is on the right track. At least the aspect of don’t spend the money that you don’t have is very clear.
They inherited a very messed up economy and it shows you what you can do to destroy something. When I left in 2011, this economy was strong. Good forex reserves, inflation was low and interest rates were going down. But suddenly 10 years of mismanagement took us where we are.”
Dr Fundanga said he believes that the new dawn government is on the right track because of the masterstroke in the name of the Constituency Development Fund (CDF) which once it is actualised and money is taken to the people, it would help to change things.
“Today this new government has been in office for nine months but people are complaining as if they have been in government for years. I was in the central bank for nine and half years and you know just to have a financial sector development plan and have it approved by cabinet took us two years,” he said. “These things don’t change overnight. One thing that we should be happy about is one masterstroke. This CDF people are complaining about, for me it’s a masterstroke because all the time when I started talking about economics people were talking about dencetralisation, take development to the people.
We just had it on paper. The money was always in Lusaka. This is the first government to take this money to the people so that they can decide on their own. What they want to spend on, who they want to give scholarships, which community project they want to support and even productive activities like cooperatives, investment they can choose who gets it. And yet when you hear of the criticisms is as if the thieves of public funds have been always in villages. Villagers have never stolen any money because we never gave them any money. And this is the first time and give them a chance and don’t take one year to judge them whether they have succeeded or not. The first tranche has just been released…”
Dr Fundanga added that things can only be changed if right policies are put in place.
“Whatever we did at central bank can’t be attributed to one individual, me. You can change things if the policies are right. For an economy to function well there must be macroeconomic stability and to be honest this depends very much on the fiscal side, what government is spending. If it is spending money that it does not have and it is borrowing, you will never have macroeconomic stability. During that time (his time at BoZ) thanks to minister of finance [Ng’andu] Magande, he was very focused on what government was spending that it didn’t spend what it didn’t have and also president Mwanawasa was very focused on ensuring that we were all alive to the fact that you don’t spend money that you don’t have,” he said. “We were helped with the fact that Zambia which was one of the heavily indebted countries had by 2006 met the HIPC (highly indebted poor countries) debt relief conditions and those conditions did put a lot of…on financial discipline which also reflected favourably on the exchange rates. What is the challenge with the interest rates? You know when government is borrowing sometimes they borrow locally or internationally and when they borrow there is an issue of treasury bills and bonds and so forth. They are drawing from the same money which you and me can go and borrow from, the commercial banks.”
Dr Fundanga added that when the government draws a lot of money, there would be very little remaining for “you and me so interest rates now compete for a small sum of money for our loan and obviously they will be priced up”.
“When they failed at that time it was because government was not borrowing. The discipline I talked about by the finance minister but I have never found a central bank which had enough time to do everything it wanted. Sometimes what you are capable of doing is determined by the political environment,” he said.
Dr Fundanga wondered why many African countries don’t believe in themselves to solve their own problems but rush to the outside world to do so.
“Sometimes you wonder, why even the IMF have to come and do a debt sustainable analysis because we have trained people in Bank of Zambia, Ministry of Finance and so forth? The problem that lies in some of our countries is that even when so much money was spent training you, they still believe that you can’t do it. Self-belief is key towards any success. If we had said any problem that we had and ran to the outsiders to come and help us, perhaps we couldn’t have achieved the little we did but we believed in ourselves that we can do it and I am sure we did it,” said Dr Fundanga.