WE ARE IN A MESS: THINGS ARE GETTING WORSE; NOTHING IS WORKING- ANTONIO MWANZA

ANTONIO MWANZA WRITES:-

WE ARE IN A MESS: THINGS ARE GETTING WORSE; NOTHING IS WORKING:

1. INFLATION
Annual inflation has increased to 13.8%from 12.9%. This means on average, prices of all goods and services have gone up 13.8%.
ELECTRICITY TARIFFS
Electricity tariffs have commutatively gone up by 18.2% within the last 8 months.

PER CAPITA
Zambia is one of the POOREST countries in the whole world with a per capita of $1,468 dollars against a recommended average of $10,000.

POVERTY
Poverty levels have WORSENED from 54.4% in 2015 to now 60%. This means 60 out of every 100 Zambians are poor.

INCIDENCE OF POVERTY BY PROVINCE
Muchinga : 82.6%
Western : 82.2%
Northern: 78%
Luapula : 77.3%
Eastern : 76.4%
Central : 67.5%
Southern : 63.5%
North-Western : 61.6%
Copperbelt : 35.9%
Lusaka : 27%

MONETARY POLICY RATE (MPR)
The Bank of Zambia has just increased the MPR to 13.5%

Here are the implications:

1. High MPR means higher interest costs has led to increased debt burdens for individuals and businesses borrowing money.

2. High MPR has resulted in higher monthly payments, causing financial stress and making it challenging for borrowers to meet their financial obligations.

3. High MPR has reduced consumers’ purchasing power as more of their income goes towards servicing debt rather than spending on goods and services.

4. High MPR is also affecting investment decisions, as borrowing costs have increased, reducing the profitability of investment opportunities.

5. In the broader economy, high MPR is contributing to economic slowdowns by reducing consumer spending and business investment.

Overall, high MPR has significant negative implications for both individuals and the economy as a whole.

STATUTORY RESERVE RATIO (SRR)

The Bank of Zambia has again increased the SRR to 26%

Here are the implications:

1.High SRR means banks are required to hold a larger portion of their deposits as reserves, reducing the amount of money available for lending and investment in the economy.

2. With less money available for lending, banks have raised interest rates to compensate for the reduced liquidity, leading to higher borrowing costs for businesses and individuals.

3. Higher borrowing costs and reduced access to credit is dampening economic activity, as businesses is delayed or cancelled investment projects, and consumers are cutting back on spending.

4. High SRR is also affecting investment decisions, as higher borrowing costs and reduced economic activity is making certain investments less attractive or feasible.

5. While high SRR may reduce inflationary pressure by tightening liquidity,it has led to inflation as businesses are passing on higher borrowing costs to consumers through increased prices.

6. Excessively high SRR levels are straining banks’ balance sheets and are leading to financial instability as banks are struggling to meet reserve requirements or if there’s a run on deposits, for example,Investrust is gone.

The biggest problem is that they have no solutions whatsoever.