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Tuesday, 6 May 2014

Politics of Subsidies

"The government has no choice but to bring back subsidies on production. It has to bring back subsidies on fertilizer, subsidies on fuel. Look at the agriculture sector, it is in a mess because most of our peasant farmers can not afford fertilizer which simply means that we have no food security in the country..."
(FDD Spokesperson) 

This is just economic folly. Where is GRZ going to find the money to do all these things? Where does FDD think PF will find money to restore subsidies? The counterfactual has changed. Have they been sleeping?

It is not just FDD. UPND, MMD, NAREP, ABZ and countless opposition parties are all talking about restoring subsidies. They never tell you where the money will come from. Some promise us that they will restore them when they are in power. It is the same old lies from the same tired clique of politicians.

Let us be clear. Removing subsidies was the correct thing in PRINCIPLE. The mistake is that the money was wasted on many areas, especially the substantial and costly rise in public sector wages and creation of new districts. Those things are not going away. 

The point here is is that even if GRZ wanted to bring back subsidies it is not able to do that NOW.  The money has already been spent on new areas that are part of our REOCCURRING expenditure. We cannot have everything. We have made our bed and now we must sleep in it.

A lot has changed since Alexander Chikwanda became finance minister. The national finances are in a much worse position. Any subsidies would need to be funded by endless borrowing. Is that what Antonio Mwanza wants? It seems like these people have not been following the news. We have a fiscal crisis at present. 

The problem is that the general public in Zambia is currently unable to think through these issues properly. We are country that is too gullible! The media is devoid of any critical thinking and it is unable ask tough questions of politicians. 

It is failing to present the public with key facts and assessment of the relative merits of different policy approaches. Analytical voices that can add genuine value to debates are never given any intellectual space to be heard. The result is that we have the likes of Antonio Mwanza spilling out economic folly at every turn. 

What we need to do is demand that political parties not only tell us what they plan to do, but how it will be funded. They need to have a "shadow budget". And if they cannot put one together it means they are not ready for power. Simply shouting for subsidies will not change lives for the better.  

Chola Mukanga  
Economist | Consultant 
Copyright © Zambian Economist 2014

1 comment:

  1. Very good point about opposition politicians having shadow budgets or giving us info on sources of funds for the policies they propose.


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