An established economist has disclosed that Zambia will this year 2022 be surviving mostly on international reserves as the economy is facing serious difficulties.
Zambia’s reserves in July 2021 crossed the standard three months import cover threshold after getting a $1.3 billion special drawing rights – SDR allocation from the International Monetary Fund – IMF following the global Covid 19 pandemic.
An alternative source to grow international reserves through gold through a state owned Zambia gold company also suffered a set back after the rich Kasenseli gold mine of Mwinilunga was closed by the new dawn administration with no road map shared on its re-opening.
Yusuf Dodia told the Zambian Business Times – ZBT that Zambia is running a deficit budget, as more than 50% of the national budget is meant to be funded from foreign sources such as grants and loans which will makes it very difficult to build on the balance of foreign reserves held.
Dodia stated that the other factor that is making it difficult for the nation to build foreign reserves is the rising debt which has now increased from US$14.1 to over US$ 17 billion which is really causing problems in terms of the nation’s ability to finance it’d development programs.
“Building foreign or international reserves is not currently easy for the country because its fighting a difficult battle of trying to raise resources in order to manage the current situation of financing the national budget and also the servicing of external and local debt”, Dodia stated.
He added that a look at the 2022 national budget, it shows that the debt servicing allocation for this year is K78 billion as opposed to K46 billion last year, hence building or even maintaining the the balance held on international reserves becomes a very difficult action to focus on.
“If the country can tighten its belts and focus on developing the domestic private sector, make the cost of doing business in Zambia affordable as much as possible, reflect on the policy of energy management by adjusting the policy to ensure that industry and commerce get the cheapest fuel and electricity in the region, these can help to make the local industry competitive. I think that if we do that, we will be able to achieve economic growth and we will be able to begin to contribute and grow our international reserves”, he said.
The renowned economist told ZBT that situation the country finds itself in makes it difficult to address the issue of sustaining or even growing its international reserves. He added that it is pointless to start assessing whether the country has contributed towards growing its international reserves because one can see that the country is not adequately dealing with its day to day requirements, then how does it even start to deal with the issue of growing its international reserves? Dodia asked.
He said that the country is dealing with what gives people their basic needs and that’s to make sure that the people are productive, people are employed and making sure that people are managing in these difficult times of the covid pandemic, the increased oil prices and where the economy is not competitive as far as the regional economy is concerned.
He added that he does not expect the Zambian economy to pick up this year, because this is the year that the Ukraine – Russia conflict is going to have a big and negative impact on the economy, thus the year 2022 is the year were country will try to simply survive.
Analysts say Zambia can build serious gold reserves as an alternative or complimentary to forex reserves but lethargy and lack of drive from successive authorities at both the ministry of finance and Bank of Zambia remains a challenge.
