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Thursday, 10 July 2008

Is the Post perverting economics out of cowardice?

Today's Post Editorial presents a strange argument that the President's current illness may have a serious impact on inflation because political uncertainty may weaken the Kwacha. Whilst I welcome the Editor's eagerness to inject economic theory in public discourse, I do think its unfortunate the way it has been introduced. First, leaving aside the complicated issue of whether appreciation of the Kwacha is desirable, the smart money is on further appreciation. Secondly, the article does not fully explain why we should worry about this issue just from observing 2 weeks data and without full monthly data from the CSO on inflation. Its very premature to suggest that inflation will get worse off the back of a minor depreciation. Thirdly, and more importantly, I question the Post's motive. It appears the Post have used this loose assessment to spark a debate on the whole political uncertainty around Levy's illness. They appear not to have the courage to simply question why the public does not have more detailed information on the President, so they have decided to construct an argument based on inflation - market uncertainty leads to depreciating exchange rate leading to more inflation! The hope is that it plants a thought in readers that the market uncertainty stems for lack of detailed information about the President's medical condition. Unfortunately for the Post, the assumed linkages aren't that simple.

4 comments:

  1. Firstly I must say that The Post need to hire an economic commentator to write on such matters. I found the analysis to be rather shallow and disjointed.

    Firstly, the article suggests that the President is directly involved in economic management, when in actual fact his office steps in when there is a policy issue of very high concern.

    Secondly, the article raises concern about the impact of currency depreciation and the oil price on inflation. While this is a reasonable question it should be asked with reference to all possible sources not just the illness of the President. The article ignores the likely impact of the strong kwacha over the past year and places concern in what could be a temporary step in the exchnage rate path. Remember, while the exchange rate bounces in the short term, it is the economic fundamentals that determine its average position.

    Also, an insight into the reason for the kwacha appreciation can not be separated from the fact that the dollar gained that day on the international market. What I expect of the Post is to talk to the market players and find out who did the most buying of foreign exchnage on that day and who was least willing to trade. Of course the interpretation differs if importers are buying than it would be if foreign investors with real or financial assets.

    I chose not to comment on the analysis the attempt to explain the impact of oil price on inflation as it omits several important aspects such as the various channels of impact and the role of reactionary monetary policy to such a shock.

    ReplyDelete
  2. CM,

    Agreed.
    Very bad assessment all round.

    But I am not suprised given the articles which have followed have confirmed by initial suspicions.

    All headlines since that poor assessment shows a change in attitudes on covering the President's illness..

    In general the Post needs to beef up their economic analysis....they have lots of reporters..but no economic commentators..

    ReplyDelete
  3. In general the Post needs to beef up their economic analysis....they have lots of reporters..but no economic commentators..

    That's where you step in, brother.

    ReplyDelete
  4. I always tend to see newspaper like political parties. The only difference is that rather than follow George Bush's agenda, you follow Murdoch...

    I prefer unedited blogging....:)

    ReplyDelete

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