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Prepare for Impact: Economy is Diving! Brace for Negative Impact! Economy is Falling!

Filed under: Business,Latest News |
Alexander Chikwanda

Alexander Chikwanda

By Hjoe Moono
Earlier this week the PF government through its Members of Parliament (MPs) in parliament passed a motion that increased government borrowing from the domestic loan threshold of K200 million to K13 billion, representing a 6400% increase!!

Yes, 6400% increase in domestic borrowing!! Wow!! Can someone please confirm my calculations, could I be wrong? If the government therefore borrows at the limit from the banks, the debt would rise as high as 6400% from where it is today. I could not believe this, my simple calculator could not get this right-it gave me an ERROR!

Seriously, this is an ECONOMIC MANAGEMENT ERROR!! The economists at Ministry of Finance should have honestly told Ba Chikwanda that there is an error in the calculation!

I know there is an Economic Management Division (EMD) at Ministry of Finance, could it have been changed to Economic Management Error, (EME)? No disrespect for my fellow economists there, they are fine economists, but I suspect they must be working under tough instructions& conditions.

Noting that it passed Parliament, I cannot agree more with Mr. Micheal Sata’s honesty about his MPs, they seem indeed to be as he said: Useless! For if they weren’t, how could they pass a motion with an error? But then, many things have become LESS in Zambia lately besides the MPs: Our hospitals are Nurse-less and our Kwacha is becoming Worth-less by the day.

Back to the 6400% increase in debt threshold, this is clear preparations for economic failure on the part of PF. But to cement their borrowing appetite and crowd out private investment and borrowers, they have increased the minimum bank reserve ratio from 8% to 14%. What this means ladies and gentlemen is that there is now 6% less money (14%-8%=6%) for banks to lend to you and I, period! It means there is less money in the banks for loan, therefore NO more money in your pockets!

But what is the reserve ratio you may ask? A reserve ratio is a percentage of deposits that banks must keep in their banks to enable them be liquid, i.e, to easily meet the demands of clients through withdrawals etc. So if you have a reserve ratio of 8%, it means that out of all deposits, the bank will keep 8% and lend out 92%. What the PF has done now is to command the banks to lend less to you and me from 92% to 86% by increasing the reserve ratio. So if you had applied for a loan a week ago, expect it to be declined! Sorry!

But you see, while they have reduced money for you and me, they have increased their need to borrow from the same banks. So it’s the pure case of a dad reducing your daily meals from 3 to 1 to that he can increase his from 3 to 5—Mwadya Mweka Daddy reloaded!

But then, the comedy of errors in Mr. Chikwanda’s economics fails him further: While he reduces the borrowing to the public, he still insists on a policy rate to cap interest rates on domestic borrowing, when the demand and supply sermons he gives on a nose diving kwacha will dictate that the interest rates should rise. Soon, expect to hear higher lending rates from the banks and financial institutions.

It seems the septuagenarian Minister of Finance and his colleagues, mostly septuagenarians too, including the president, have absolutely no idea what they are doing. The best we can do is to prepare for the worst: Higher inflation and higher debt coupled with a valueless kwacha.

With the kwacha free falling at Newton’s 10 metres per second speed, higher levels of debt, reduced loans and upcoming higher interest rates, ladies and gentlemen, brace for impact! The economy is diving! Brace for negative impact!

PS: A septuagenariana person who is between 70 and 79 years old.


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