by Patson Phiri – SANF 06 No 43
Zambia’s inflation tapped a single digit of 9.4 percent in April following tight fiscal policies and reduced government spending.
From the early 1990s, Zambia’s inflation has revolved around 17-230 percent despite the privatisation drive of that period supported by the International Monetary Fund (IMF) and the World Bank.
The privatisation – mainly of the copper mines – relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth.
Copper output has increased steadily since 2004, due to higher prices and the opening of new mines in the country’s North-Western province.
President Levy Mwanawasa’s government has insisted on improved agriculture, prudent expenditure of public resources and the fight against corruption to jump-start the economy. Economic failure had been blamed mainly on corruption and anti-agriculture investment policies.
The maize harvest has increased in the last four years while cooperation with international aide agencies improved from about 2003 when Mwanawasa launched the fight against corruption.
A tighter monetary policy was launched and helped to cut inflation and improved the economic performance.
The country’s Central Statistical Office says lower food prices for the month of April triggered a reduced annual inflation rate to 9.4 percent compared to 10.7 per cent in March.
When broken down into components, the goods and services had the highest increase in average prices at 3.6 percent, followed by medical care at 3.3 percent while clothing and footwear was at 2.8 percent.
The food, beverages and tobacco component registered a negative monthly increase in prices from March to April of minus 1.1 percent.
Annual food inflation was recorded at 8.3 percent, declining by 2.6 percentage points from the March rate of 10.9 percent. Contributing most to the decline in inflation were decreases in the cost of food such as maize.
The local currency, the Kwacha, has been gaining in strength against the major international convertible currencies from about K7,000 per US$1 in 2001 up to K2,900 per US$1 this year.
President Mwanawasa has weathered tough criticism for his government’s support of the aid conditions set by the IMF and World Bank.
Civic bodies accused his administration of sacrificing too much in a bid to have the country’s external debt reduced.
Zambia is largely an aid-dependent country that has fought hard to reach the Highly Indebted Poor Countries completion point after implementing a series of austerity measures prescribed by the international financial institutions.
Among the belt-tightening measures was a six-month freeze on salaries for state employed workers, introduced in February 2004 against the irony of the tax hike of up to 40 percent on their wages.
Government also declined to employ over 12,000 teachers trained in 2002 and 2003, to avoid spending more than 13 percent of the country’s budget on salaries as prescribed by the IMF and World Bank.
Schools experienced a shortage of about 7,000 teachers, despite having 12,000 trained teachers who could not be put on the payroll due to the expenditure ceiling.
The IMF said it was not responsible for the failure by the government to recruit teachers but merely demanded reduced expenditure to help the country recover from its battered economic status.
The sigh of economic recovery comes against a background of the presidential elections later this year.
Mwanawasa is seeking a second and final five-year term of office and faces stiff challenge from two opposition alliances in the countdown to the presidential elections whose campaign trail has been dominated by constitutional issues.
Central to the constitutional debate are demands that the first-past-the-post system of electing the president be scrapped from the constitution to ensure that a president is elected via a 50-percent-plus-one majority system.
Under the current law, the presidential candidate is declared winner with a simple majority victory.
President Mwanawasa has insisted that the demand is genuine but is a constitutional issue, which will be handled after the elections when the review process will be finalised.
Government has passed a new Electoral Act, that takes into account some of these demands, but opposition groups and the civil society say the law should be withdrawn because it gives more powers to the president.
The date of the elections has not yet been set and has become a matter of debate. The civil society groups’ main source of objection to the electoral bill is that it empowers the president — and not the electoral commission — to set the election date (as is usual in a parliamentary democracy), and does not include the requirement that a president be elected with the 50-percent-plus-one vote.
Activists and opposition parties held demonstrations throughout 2005 to demand that the constitution and electoral laws be amended ahead of the polls.
Government accuses the anti-bill groups of failing to dialogue with it on their concerns.
