A highly classified document obtained by the Zambianwatchdog has identified a number of key factors leading to the continued depreciation of the Kwacha.
The secret document marked ‘HE President Michael Sata’s attention and eyes only’ prepared by Bank of Zambia, Ministry of Finance, Zambia Revenue Authority, and Office of the President officials lists a number of factors for Kwacha depreciation.
Top on the list is the huge budget deficit as a result of a number of unplanned projects across the country which the PF government embarked on without financial resources to support them.
The document, which ideally should not even be marked secret, notes that while roads and other infrastructure are good, these must be well-planned so as not to choke and burden the treasury with a huge domestic and foreign debt.
“Now because of these unplanned projects, this has led to another problem leading to the depreciation of Kwacha which is a huge domestic debt,” the document states.
Currently PF government has no plan on how to dismantle the huge domestic debt where contractors have been awarded huge contracts and given a go ahead to implement even when there is no money in the treasury.
And because of the huge domestic debt owed to contractors within Zambia, PF government has again created another problem leading to the depreciation of the Kwacha, which is foreign debt as a result of unplanned but continued borrowing.
The 36-page document also indicates that PF government is recklessly borrowing and investing money in projects that do not bring immediate revenue and create permanent employment in short term.
Some of the loans are currently due for servicing and PF government is now spending huge sums of US Dollars every month repaying the debt, hence depleting the foreign currency reserves necessary to keep the Kwacha strong.
Poor human rights record where opposition political parties, journalists, and civil society organisations are being persecuted and arrested has also been cited as reason for depreciation of the Kwacha as key donors and investors have lost confidence in the PF regime.
The document notes with concern a situation where democratic ideals such as freedom of expression, freedom of assembly, violence by PF cadres against citizens, are slowly being eroded by the PF using the archaic Public Order Act and other repressive laws.
“There is no goodwill and confidence towards the PF government due to poor human rights record, and so most donors are not willing to pump in hard foreign currency in form of free aid to some projects,” the document obtained from Mr. Sata’s office by the Zambianwatchdog states.
The only willing donor for now is China, but their donations mainly go towards supporting projects where Chinese are the main contractors, and so the money basically goes back to China.
The falling copper prices on the world market have also been partially cited, but this has very little effect for now because the currency was still very strong under MMD, even when copper prices were far below the current prices.
The document notes that at the current poor Kwacha rates, another fuel increment was eminent because government has not money to continue buying crude in US dollars at a loss due poor exchange rates.
“But a great caution must be taken before implementing this painful measure as it may create a serious and unmanageable political instability due to mass uprising, as prices of most commodities were already too high for the many Zambians,” the document states.
The document also notes the continued speculation on the health of president Sata as creating economic instability and loss in donor and investor confidence resulting in lack of foreign currency injection, hence Kwacha depreciation.
Failure to enact the new constitution has also been partially cited as the PF government is now being viewed as not being trustworthy, hence loss in investor and donor confidence.
Finally, the document also gives figures of political party ratings per province among the registered and likely voters in a survey conducted between July 2013 to May 2014.
The Watchdog will for now withhold the percentage ratings due to the healthy of someone, who we know has no time to read such bulk documents, no matter how they are summarised, even in two sentences.
But just as hint, other issues highlighted include the unresolved Chitimukulu saga, Barotse Agreement, high cost of fuel, mealie meal, and other essential commodities, internal wrangles, as reason that has led one political party to significantly lose popularity even in their strongholds.
Of course there are also ratings on media influence in Zambia, which we shall withhold.