The Finance Minister Hon Musokotwane tried this afternoon to inspire some confidence in the Kwacha, after his Budget address failed to readdress the continuous slide. The full statement can be found here. He again reminded us the Government belief "that the economy going forward still remains fundamentally strong. This is because the fundamental strength of any economy is derived from the investments that it makes in building its own productive and intellectual capacities..."
And what are those "investments" for Zambia that the Government has made? Musokotwane should know that we not as foolish as he assumes. We choose not to share his John McCain moment. The fundamentals of the Zambian economy are weak. They have been weak for a long time. As my good friend says "Zambia has been in perpetual recession since time immemorial". Our economy is fundamentally dependent on copper, which in turn is dependent on world demand. We can hardly indpendently finance our national budget and rely on the good will of the world to deliver health care and education. Productive and intellectual capacities? Just who advises this guy? All the analysis I have see show that Zambia has low labour productivity and suffers especially in non-mining sectors. To be sure Zambia is an attractive place to invest but we are much more susceptible to political risk than Musokotwane would care to admit.
The real coded message I deduced from the statement is that Zambians should learn to live with a weak Kwacha, BOZ will do what it can to stabilise rate, but its difficult because we are at the mercy of foreign powers and dollarisation is a real danger. I do agree with him on one thing though :
I was one of the few, alongside the agriculture and tourism sector players, who bemoaned the strength of the Kwacha last year (see An even stronger Kwacha? 2nd Edition ; and the very graphical blog More stable...but in the wrong direction? ). If this helps with diversification of the economy that should be a good thing. I have my doubts even there though - see A mid-week rant.....on the state we are in... But here is my question to Mr Musokotwane : if a weak Kwacha is a "good idea" now, why was it not regarded as so, when the Kwacha was strengthening last year possibly even damaging the diversification, that we are now chanting?
...the current level of the Kwacha presents a number of opportunities for our economy. Firms that receive incomes in foreign currencies and face costs in local currency stand to gain significantly from a depreciated currency. This is particularly seen in the mining sectors and tourism sectors, where firms have tried to retain workers as much as possible as a result of improved cash flow rising from the depreciated Kwacha. Exporters also stand to gain, as their goods will now effectively cost less to buy. Local manufacturers are also urged to take advantage of this situation, as their goods will be more competitive on local and foreign markets...