Chikwandanomics not working

 

We have time and again on this forum argued that there is a clear and visible difference between a good and a bad finance minister. A good finance minister keeps his nation informed about the true state of the economy and prepares public opinion for adoption of appropriate policy measures to keep the economy healthy. A bad one, on the other hand, misreports facts and tries to trick the public into believing that all is well, until the economy begins to fall and is beyond repair. But then there is another kind, such as the one Zambia has, who, even when it is clear that the economy is falling apart under his nose, strongly argues otherwise, as if he lives in a vacuum where he is the only citizen. Such a one is one that governs via deception, but for how long?

And like wise, a good government is distinguished from a bad one by the appointments it makes to key positions and the respect it shows for the rule of law. So far, it is very clear that the PF, with regards to economic governance appointments, has no interest nor desire to build vital national institutions-if anything, the trend has been in the opposite direction. I am incapacitated to comment on the PF’s adherence to the rule of law. As the saying goes, you cannot tell that a road is straight until you see a crooked one besides it.

Finance Minister Alexander Bwalya Chikwanda, or ABC as he is affectionately referred to, called out of retirement, and charged with the Ministry of Finance portfolio, a position he held 40 years ago—yes, four decades ago—with clear poor economic management records, is in a state of denial about the state of the Zambian economy. He demonstrated this denial in his state of the nation address when he withdrew SI33 and SI55, and recently when he arrogantly told a BBC reporter that the IMF is not the ‘sole repository of knowledge’ and therefore its assessments of the Zambia economy are untrue. Yet, this is the same man who, a few days ago in congratulating Mr. Chibamba Kanyama on his appointment to the IMF claimed he was Zambia’s Governor at the IMF in Washington—the same institution he disagrees with. Mr. Chikwanda goes on to claim, to the entire world on BBC, that the Zambian economy is ‘doing very fine’, and that exports are on the rise owing to the depreciation of the kwacha. Clearly this man seems to live in some other distant country other than Zambia. The flaws in his understanding of policy issues and his approach to the country’s economic management are too obvious to be ignored.

We clearly live in the era of Chikwandanomics—Debt. Denial. Deception.

But then, this is what you get when appointments to key institutions are based on political expediency and personal loyalty rather than professional competence and personal integrity. There was no integrity in having an entire Minister of Finance argue with a reporter and dispute an undisputed assessment of the Zambian economy by the IMF. But that we have continued to be governed by such, it seems such appointments enable the rulers to exploit national financial resources without any hindrance, even when they are hurtful for institution-building and macroeconomic management. And I guess ABC is doing very fine and does not see the problems facing his economy—Denial.

We all would agree that it would be absurd if a poorly trained head of a private security company such as ARMCO is appointed as the Army Commander. What would happen to the defense of the country? So why do we then have compromised appointments in the affairs of our economy?

Mr. Chikwanda was Minister of Finance in the 1970s. Holding onto him now is like bringing a steam powered locomotive engine from the museum as the main service carriage for Zambia Railways, and hope that the company will grow. It’s clear it cannot grow, and clearly our economy is breaking apart. Calls by former PF cadres such as Dr. Mbita Chitala and Madam Edith Nawakwi are justified—Mr. Sata needs a new set of economic managers and advisors to commandeer this country into safer waters. We are currently sailing on dangerous waters: Debt is high. Inflation is rising. The Exchange rate is out of control. Foreign reserves are being depleted. These are clear signs of poor economic governance which the IMF has raised, which everyone on the streets is concerned–yet, we have ABC deceiving the world that all is well—Deception.

ABC and his colleagues recently celebrated the new debt of $1billion at a higher interest rate, and one would wonder what really is there to celebrate. At this rate, if Zambia is to issue another bond, it will be at an even higher interest rate, but the denial type of leadership we are experiencing doesn’t seem concerned at the repercussions of such actions. The ever increasing deficit is a clear reality that the government is unable to generate enough revenue to meet even its non-debt-servicing non-developmental current expenditure. Accordingly, a part of its current non-debt-serving expenditure, all debt-serving and debt repayments, and all development expenditure is by now being financed through borrowing, creating the classic situation of debt trap. Ngandu Magande, arguably one of the most accomplished Ministers of Finance in modern day Zambia, recently challenged the government on the debt trap we are headed to, which the IMF raised concern, but clearly, one would not expect a reasonable response when the people in charge live in denial and survive on deceiving the head of state and the nation that all is well.

The minister, with his colleague at the central bank, has adopted an impotent approach of talking tough accusing ‘cartels’ in the financial sector with the assumption that the exchange rate is being driven by speculation and manipulation. He deliberately denies that there is some inherent incompetence which is expected of someone that last worked on such a job 40 years ago: He is out of date. He needs to accept this, and pave way for possibly more recent practitioners in the field such as his PS or Secretary to the Treasury—they have the potential to do a better job.

We can only imagine the reality that will be hidden behind the web of trickery of the budget documents and wordiness of the finance minister in his budget speech. We would suspect that there will be enormous effort to camouflage the facts, dodge difficult economic policy decisions and at the same time avoid a crisis on their watch by more borrowing—the only thing they know well.

Not being able to control expenditure, and unwilling to collect taxes from the mines, even when we are being mocked by KCM’s CEOs, the government has adopted the politically easy course of taxing the poor through borrowing and inflation.

Chikwandanomics is not working!

 

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