Economic situation is worse than we think – Mutati

FELIX Mutati says sentiments coming out of key economic managers like the BoZ governor and Secretary to the Treasury are clear symptoms that the country’s economic situation is probably much worse than is imagined. And Mutati says President Edgar Lungu’s creation of two more districts in North-Western Province will not lead to improvement of people’s lives but merely add to the already mounting economic pressures the country is going through.

Meanwhile, Mutati says cutting unnecessary expenditures in view of the deteriorating economy in the country will only make sense if it starts with the President and Cabinet ministers. Last Friday, the Bank of Zambia stated that in view of the current difficult economic situation worsened by the fall of the kwacha against major convertible currencies, “we all need to engage in expenditure-reducing and expenditure-switching activities going forward.”

Last week, Secretary to the Treasury Fredson Yamba warned that government revenues were focused to decline owing to the current turmoil in China, which had led to a sharp decline in copper demand. Yamba said there was need for the country to cut back on recurrent expenditures such as “non-priority” trips for bureaucrats to deal with the country’s surging deficit that was expected to rise further on reduced government revenues, especially from mining-related industries. In an interview, Mutati said it was clear that the current regime was consistently ignoring key advice from economic managers who were in direct contact with reality on the ground.

“The statements coming from the Bank of Zambia governor and the Secretary to the Treasury are very sensible, and it is not that the PF don’t know what must be done but the challenge for this government is implementation; the actions,” he said. “It is doing the correct thing that is going to cut down expenditure, on a practical basis, the wastage of expenditure, the leakages of revenues; they must begin to respect what the budget says. And the representation of the level of naughtiness of this government is the forever expanding budget deficit. And that should be the first call because what the budget deficit does is that it unhinges your economic fundamentals, which is translated in the increasing cost of money and worsening the poverty levels in the country.” Mutati said the PF should take time to listen and act on advice from Bank of Zambia and senior Treasury officials. “When technocrats begin to speak in the manner they are speaking, it’s a symptom that their advice is falling on hard ground,” he said. “It is also a symptom that the situation is probably much worse than we think. So, my advice to the politicians in government is, don’t just listen but also learn to act on sound advice from these technocrats because now what they are telling us is that ‘enough is enough’.” Mutati said the deterioration of the Zambian economy could not be solely blamed on the current economic turmoil in China because the domestic economy had seen its key fundamentals start waning as early as 2012. “Notwithstanding the external factors, the deficit is also negatively impacting the exchange rate,” he said. “Bank of Zambia can intervene but they cannot intervene on a sustainable basis and at the moment, they are practically raising their hands that ‘we no longer have monetary policy instruments that we can apply to address the falling economic fundamentals’ and so what is required is to get the budget framework and reprioritise expenditure.” Mutati also said as long as President Lungu and his Cabinet do not demonstrate reform which shows that they accept current economic challenges in the country, the call to cut down on government recurrent expenditure would be ignored by civil servants.  “Action is more critical than pronouncements, and discipline must reign from the top,” he said. “If people see that, on a practical basis, there is expenditure curtailment from the highest level, from the ministers, then it will filter into the system. But when they see that there are pronouncements but practical action is not matching the pronunciations, it will remain talk, talk, talk and no change.” And Mutati said President Lungu should not have created Mushindano and Kalumbila districts, which he observed was merely a way of canvassing political support. “We are already on the high road to unsustainable debt levels owing to these unplanned expenditures and in view of the current problems, one would have hoped for realism and discipline. But not only is building more roads leading us nowhere, but we are also creating new districts. It should not be about appeasement; it is not about celebrating unfocused performance,” said Mutati. “It is about addressing the fundamental issues such as the rising cost of living, issues of increasing poverty levels, shortage of drugs in hospitals. We still have challenges in terms of providing basic infrastructure in the districts that were created. Everyone wants a district, even I want Lunte district but all we are saying is that ‘how do we deliver better to the people?’ Do we create a district and therefore the exchange rate is going to be impacted upon? The answer is no!”

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