IT’S difficult to turn around the economy at this moment, says Movement for Democratic Change leader Felix Mutati.
Mutati, a former minister of finance, said policy rate change alone could not bring down inflation hence the need for different interventions.
He said reducing the import and export gap could help bring down the cost of major trading currencies and strengthen the kwacha.
But Mutati doubted the probability of turning around the economy before the August polls.
“In the next five months leading to the election, it will be very difficult to turn the economy around because even if you are going to do your debt restructuring, the impact will be felt much later.
“There are several interventions that are needed to realign the economy – from a monetary policy, fiscal policy as well as structural reforms – in key economic and social sectors. However, such reforms are never easy, and require a serious level of discipline and commitment to have any success. In addition, reform implementation takes a long time. It is like a seriously sick patient, the patient must firstly be willing to follow the doctor’s advice, and then no matter what you inject them with, they will need time to heal. Therefore, it is not a quick in and out situation,” he said. “Inflation is vicious and it hurts the economy and its people, especially the poor because they do not have the capacity to react to the inflationary trends, for instance, adjust their already strained living standards. The poor are already at the bottom and do not have any space to adjust their lifestyles in the face of inflation as the rich are able to do.”
Mutati said the Bank of Zambia had put in place measures to adjust the policy rate, but inflation cannot be contracted by this single act alone.
“You need a cocktail of measures that you should put in place to bring down inflation. In particular, it is important that the fiscal side supports monetary policy and adopt supportive measures on the fiscal side, such as stabilisation policies, reducing the fiscal deficit, cutting wastage – and adopting private sector led solutions, especially where private sector can deliver solutions,” he stressed. “One of the biggest challenges we have is imported inflation. We need to seize opportunities like in the agriculture sector, where we have opportunity to export maize and mealie-meal products that will generate foreign exchange and help close the import-export gap.”
Mutati advised the government to make the necessary interventions.
“You have to get the economy working again. So the immediate thing is you have to start sending the right signals of intent to key sectors like energy, agriculture, education, health, infrastructure that wastage will no longer be condoned,” said Mutati. “You will [have to] empower the private sector to deliver and in so doing start closing the fiscal deficit. In these sectors, we have spending by government not backed by corresponding value of goods or services – that is bound to stock inflation. The petroleum and electricity sectors are also big culprits to our fiscal deficit challenges. But these are easily fixable.”