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Sunday, 12 May 2013

Has the era of subsidies ended?

Finance Minister Alexander Chikwanda recently said government will resist the “cheap popularity” that subsidies provide because it is too costly :
“Whether it’s fuel, whether it’s electricity, whether it’s anything; no subsidies...It’s not good for the Zambian people. Government is not here to preside over fiscal irresponsibility. We have so many huge tasks before us but the resources are very limited."
It is certainly a brave statement. Whether there's a genuine ideological shift towards greater fiscal prudence and less populism, only time will tell.

The big one clearly is the agriculture subsidy in form of the FRA. It is costing us trillions. If they restructure that we will save a lot of money. ZESCO will be very tricky!

We need to move away from subsidies. Let Government focus on putting in place direct cash transfers  to low income households and cut taxes. That's probably a much better way to tackle poverty and grow the economy than subsidies.

Copyright © Zambian Economist 2013

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