Depreciation of Kwacha will lead to increase in prices of essential goods

Depreciation of Kwacha will lead to increase in prices of essential goods

 

By Alexander Nkosi

Fuel prices have gone up but as long as this is driven by depreciating currencies, then there is a possibility that prices may even go higher.

While the price increase is not our fault as a country, the effect could be way insignificant if we had sufficient fuel reserves to last us a long period. These reserves would be used to caution the sharp increase and protect the economy. Therefore, it is not right to blame external forces. At the centre of this is lack of long term planning. Further, we cannot justify the increase by saying it is happening in other countries as well. The economic fundamentals are very different and therefore the impact is different. Zambia hiked power tariffs, taxes have also increased. The cost of production is already high and this fuel increase will not help things.

Looking at the bigger picture, kwacha depreciation against the dollar will lead to an increase in the prices of essential goods and services. The increase in fuel prices will exacerbate the situation as fuel is a key driver of price increase in other essential commodities. If this goes on for months, it will definitely impact on the implementation of next years’ budget.

Our vulnerability to external economic forces is a source of concern. This is why we have been urging government to approach economic diversification aggressively because this may happen to copper. If copper prices fall amidst high debt and all these problems, the situation will be bad. We have to ‘learn’ to learn.

Looking at the current state of affairs, I would advise the President to shake the basket and overhaul cabinet. This should be followed by practical measures to improve our economy. This won’t bring down fuel prices but it will help the economy in the long run. We need strong characters that are ready to be fired in defense of the economy so that we can implement significant austerity measures, ensure policy consistency, good and timely communication and improved overall economic management. The likes of Ng’andu Magande, Caleb Fundanga, Dambisa Moyo, Martin Kalungu Banda and many other tested Zambians would be better for our economy. When we have a very good team, visibly doing its best ….even when things are bad people would understand and tag along. These changes should not be seen as public pressure but we cannot keep doing the same things with the same people and expect change.

We love you Mr. President, hence the advice.

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