Lusaka Economist Noel Nkhoma says there has not been any significant improvement in the productive sectors of the economy to justify the recent sharp appreciation of the Kwacha.
Since January 2016, the Kwacha has gained by as much as 20 percent against the US dollar after slumping 42 percent in 2015.
But Mr Nkhoma said it is incorrect to attribute the Kwacha appreciation to Government’s austerity measures.
He said the truth is that Government is still spending on all areas adding that the only marked slowdown has been on infrastructure development programmes.
Mr Nkhoma explained that the slowdown in infrastructure spending is mainly due to the fact that the treasury has run out of funds.
He was speaking when he phoned in to the Red Hot Breakfast Show on Hot FM.
“It is not true to say there has been any serious austerity measures that have been implemented since January. If they insist that austerity is there then we have not seen that because they have not announced any,” Mr Nkhoma said.
He added, “What is happening in the infrastructure development side is that the treasury is depleted and so they don’t have a choice but to slow down their spending. A number of foreign and local contractors have not been paid.”
Mr Nkhoma who is also former Economics Association of Zambia President said the other ley factor behind the Kwacha appreciation is the Bank of Zambia’s decision to deploy monetary tools through the Open Market Operations.
“What is happening is that the Central Bank is mopping out all excess liquidity and this is simply making it difficult for SMEs to access capital for their business and this has led to many SMEs closing down,” Mr Nkhoma said.
He observed that as much as the Bank of Zambia open market operations are necessary, the manner in which the operations are conducted is suffocating the economy.
“You need a balance. There appears to be a focus by the Government through the Bank of Zambia to chase a stronger Kwacha by they are forgetting that by doing so by the inducing inflationary pressure that makes it even more difficult for the SME to service.”
He added, “The truth is that the productive side of our economy is still very weak. There is nothing that can point to the fact that we have exported more since January.”
Mr Nkhoma who is now Chief Executive Officer of BetterNow Finance, an SME focused lender said there is no magic that has happened to justify the Kwacha appreciation.
“Although minimal, we cannot ignore that the US dollar has also weakened and most of other currencies in the region have also appreciated, take for example the Rand. It has also marginally gained against the US dollar. I think people are being economical with the truth by saying Government’s austerity is responsible for the Kwacha gains,” he said.
He added, “Unless Government is able to measure this same austerity, then we can be convinced, but for now there is nothing we could point out to.”