Tue, 29 Aug 2017 10:43:41 +0000
THE revision of Zambia’s sovereign rating by Standards and Poor’s Global from negative to positive-with-a-stable-outlook is an affirmation of sound policies that the Patriotic Front government has put in place to ensure economic stability and growth is guaranteed.
This development does not only come as a positive result of various mitigating measures Government put in place but also silences critics who prophesied economic doom.
The decision by Government late last year to tighten fiscal policy and other economic fundamentals to ensure stability of the Kwacha against other international currencies and lowering of inflation though painful then, was a step in the right direction.
However, a number of economic factors put our economy under considerable pressure. These ranged from lower copper prices on the international market to unbearable load shedding of power, a situation that heavily affected the mining sector.
It is common knowledge that adverse climatic conditions induced power generation crisis which caused immense pressure on the Treasury as the government had to finance emergency electricity imports to mitigate the impact.
This unavoidable load shedding of power during peak hours across all economic sectors increased the cost of production for the private sector which drives the economy.
For instance, a number of mining companies scaled down on their production levels by retrenching workers and even placing them under care and maintenance because they could not sustain operations amidst a power crisis.
This power deficit did not only affect the mining sector but also the manufacturing sector was worst hit. This implied less economic activity as many companies reduced production, thereby less exports and consequently more imports.
Given this scenario, the implication is that our much needed foreign exchange was flowing out of the country through imports. As a result, this had a direct negative bearing on the strength and performance of the local currency.
Much as the economic outlook was gloomy, the unveiling of an economic recovery plan by the Finance Minister Mr Felix Mutati to the nation through Parliament in October last year signalled the beginning of brighter days ahead.
We recall he announced Government’s determination to embark on urgent measures to begin addressing the economic imbalances through a home grown economic recovery programme.
This was not be the first time that Government has spelt out such an economic recovery plan and asked the citizenry to tighten their belts. It had been done before.
We recall in the early 2000s, Government under the leadership of Levy Mwanawasa equally embarked on tight fiscal and expenditure policy for the country to reach the Highly Indebted Poor Country (HIPC) threshold.
This was equally a painful but sound decision that resulted in guaranteed economic recovery thereafter. It is an open secret that the economy had stabilised as the manufacturing industry boomed, the currency became stronger and inflation rates reduced.
Going by this record, we are certain that the positive economic outlook the country is experiencing is a result of Government’s decision to find home grown solutions to the economic challenges that had befallen the country.
And we note that the removal of subsidies to reduce on fiscal deficit was another decision that seemed harsh at the time but is now bearing fruit.
We concur with Mr Mutati that this development rides on the basis of the critical reforms which Government has embarked on under the Economic Stabilisation and Growth Programme to implement fiscal consolidation, remove subsidies, reform the energy sector, and embark of diversification of the economy through agriculture development and industrialisation.
We hope that the current Mopani/CEC impasse will be resolved as soon as possible to set the tone for continued economic recovery.
