Zambian economy mirrors the Mexican economy of 1995
By: Chipindi Caleb Fundanga
Upon comparing the similarities in strategy followed by the latter Mexican government and the current Zambian regime, one begins to understand the cries of many seasoned economists in Zambia. It is definitely with shock that a ministry filled with Masters Degree and PH.D holders continues to steer our country into the abyss. It must also be noted that in every chaos their is always a winner and a loser. This in mind perhaps selfish motives are fueling this decaying economy.
In the mid 1980’s the Mexican economy went through a heavy recession forcing the Mexican government to go to the United States and World Bank for a bailout. The terms were drawn and the Mexican government was urged to begin a privatization program, as usual it was as the “West” would put it, reduce burden on government. Back to Mexico and in late 80’s into the early 90’s the government had managed to please their donors requests and the Mexicans were provided a bigger line of credit.
Once again just like Zambia after we reached the HIPC (Highly Indebted People’s Completion point), after going through austerity. Mexico went on to collect billions of dollars and like Zambia they barely invested the money in Manufacturing, Agriculture or Industries meaning the investments never brought revenue. Instead the Mexican government attempted to sell government bonds that were extremely becoming worthless as a source of funds to fulfill debt repayments.
It must be noted that during the illusion of economic prosperity created by the Mexican government, the Mexican economy attracted a lot of speculative traders in their financial market but did not help the people at the grassroots because most of these players were involved in capital flight and only wanted to capitalize on the available green buck, externalizing all of their profits offshore. This practice later came to light as interest rates soared creating huge unemployment as the majority of Mexican owned businesses closed. Remember the saying in every chaos their is a winner well even in Mexico their were winners.
Then President of Mexico Carlos Salinas left office with a net worth of several billion dollars his close ally former Mexican Transportation Minister Carlos Hank Gonzalez owned an airline, airstrips, ranches, real estate holdings all over the world and at some point his son bought a commercial bank he was estimated to be worth billions of dollars. It must be understood that none of these individuals had anywhere close to this amount of wealth before the mid 1980’s. Sounds very familiar with some of Zambia’s high ranking government officials.
Morale of the story here is when the Mexican government went back to the United States and the IMF in 1995, the people who felt the pinch were not those that benefitted but the general population, they had made their money but the austerity measures would hit the lowest classes the hardest. The reduction on spending by government on social programs, education and wage freeze never affects the billionaire or millionaire in Zambia’s case.
A message to governments; Don’t borrow for things that do not create genuine wealth for the people of your country. Don’t borrow just for the sake of borrowing and last but not least if you care for the people borrow and empower your people not yourselves.
•Dr Caleb Fundanga is former Bank of Zambia governor.