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Drastic decisions needed to reverse economic fortunes

By BUUMBA CHIMBULU

DRASTIC decisions are required to change Zambia’s fortunes, as constantly making wrong economic choices will continue putting the country into crisis.

The country’s economic crisis will continue if right decisions are not made now, warns the Zambia Institute of Policy Analysis and Research (ZIPAR) Executive Director, Herrick Mpuku.

“The Zambian economy is at a crossroads. Drastic decisions are required to change Zambia’s fortunes, or be condemned to mediocrity, economic stagnation and mass poverty,” Dr Mpuku said yesterday at the 2021 annual insurers conference.

Dr Mpuku emphasised that the expansionary policy was necessary and laudable.

He however indicated that it ran the risk of limiting the potential successes of the anti-inflationary policies

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Government, Dr Mpuku said, must consider a mixture of fiscal and monetary policies to manage growth acceleration, and containment of inflation.

He also urged Government to negotiate revised terms with international debtors, and aggressively unlock domestic debt to give relief to business.

“Government must restructure with the bond holders by negotiating with bondholders to adjust the maturity and interest. Government can issue another Eurobond with the same amount to offset the current Eurobond,” Dr Mpkuku said.

He also stressed the need for Government to secure rescue package of the International Monetary Fund (IMF), supported by other creditors.

Zambia, he said, had effectively been shut out of borrowing from international financial markets (due to defaults and credibility concerns, amongst others)

“The terms and conditions of IMF loans are generally much more favourable than any commercial debt, including any debt restructuring. An IMF programme enhances transparency, unlocks other financial assistants, among others,” Dr Mpuku said.

Meanwhile, Dr Mpuku said while the long economic winter may yet persist for some time, there was reasonable prospect of massive economic rebound in the medium term.

Government, he said, needed to maintain policy consistency, transparency and accountability to achieve economic stability and growth.

“The short and medium term prognosis – It will get better, but it may get worse before it gets better,” he said.

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