WALKING ON THIN ICE
[The Delicate Economic Case of ZAMBIA]
The reason the Kwacha has posted marginal gains in value is NOT because Zambia’s economy is doing well.
This is a problem.
A laudable and sustainable currency appreciation should result from improved forex receipts emanating from economic performance, a healthy balance of payments supported by actual economic activities.
This is NOT the case for Zambia.
Here are the reasons Zambia’s Kwacha has marginally appreciated:
- Reduced imports by citizens [low credit in the economy; Zambian have no money]
- Monetary tightening [the base rate increased by the BOZ has led to low Kwacha availability thereby reducing pressure/demand on the USD. Further, non-payment of suppliers of goods and services (arrears) is also contributory]
- SDR [in the second quarter of 2021, Zambia, like all countries in the world, received millions of USD from the IMF as pandemic support, which funds improved the BOZ monetary position in terms of USD reserves]
- Foreign debt [the UPND is viewing the accrual of USDs through non-servicing of debt as income. Zambia is NOT servicing its debt and this has led to a false increase/supply in the availability of the USDs]
- Forex receipts [though there is no actual increase in these from our mines, with reduced pressure on the USD as illustrated above, the supply of the USD has relatively increased]
- USD strength [as the BRICS and other countries begin to dump the USD, this currency globally is becoming anaemic, its strength with reference to all other currencies, is weakening]
- Confidence [improved market confidence emanating from the impeding USD 1.4 billion has also helped, a form of speculation]
This then is the reason behind the Kwacha’s ‘bullish’ behaviour as economists like to mislead.
‘Bullish’ currency behaviour does NOT necessarily mean improved livelihoods of citizens.
The Kwacha’s strength does NOT mean that Zambia’s trade in goods and services has either increased, expanded or widened [economic growth].
When the government is the one employing and NOT the private sector this is a very bad economic sign.
This is socialism.
The employment of about 40, 000 civil servants recently is NOT a reflection of the improved economic performance, it is merely political.
The UPND, a capitalist party, is now practising socialism.
There is just no money to support and sustain this wage bill, which now stands at over 60 percent of GDP. .
If the USD 1.4 billion does not come and the debt servicing restarts, the FISCAL STATUS of Zambia will collapse.
Zambia’s finance minister Situmbeko MUSOKOTWANE’s BP is already high. It will get worse.
Note that the private sector in Zambia has not grown over the last one year.
It has actually shrunk and shed off over 100, 000 jobs.
A net analysis of Zambia’s job market shows negative growth.
Zambia is currently in a state of STAGFLATION and its economy has contracted.
The sale rate of goods and services has fallen, prices remain high in the face of low credit in the economy [business is slow], a precarious situation for out manufacturing industry.
Vitumbuwa siviyenda manje, as one female street vendor in Mandevu Compound, amake John, accurately captured the situation, her lips cracked for lack of vitamins and eyes bleary from despondency.
Further, the election of William RUTO as president of Kenya is NOT good for Zambia’s current government.
RUTO represents nationalism, sovereignty and Pan-Africanism.
This threatens market/business confidence, and in turn, Western FDI, which Hakainde HICHILEMA’s government is relying upon for Zambia’s recovery and prosperity.
Zambia’s candidate, Raila ODINGA, a western stooge, lost and with that, western confidence in Zambia as an investment destination has plummeted and is now under review.
We are economically walking on thin ice.
Tiliko slow.
PILGRIM
16 August 2022