Finance Minister Alexander Chikwanda presented his 2014 Budget Speech to Parliament last week. The Zambian Economist commented afterwards:
“The public-wage bill will account for 53% of government revenue in 2014. The definition of government spending out of control. How can we develop as a country with this sort of economic folly?”
Fiscal indiscipline has gotten us into some big problems before. We seem to have forgotten this already. Anyone remember HIPC and the IMF SAPs during the 90s?
In recent years, we have been privileged to have had an economy that has grown above 6% year on year. But what is the point of having such strong growth if we cannot utilise the opportunity to put in place policies and reforms that will lead to widespread, long-term development?
Zambians today have an unparalleled opportunity to change the face of their country forever. But what are they seeing instead? Politically-expedient economic decision-making and an addiction to sovereign debt. This will disadvantage everyone in the long-term, especially the ones the government says it is trying to help: the poor. We need to recognise that not even the latest raising of the minimum tax threshold for the poor will protect them further down the line. This is because having “more money in your pockets” today is not the critical issue. The issue instead is with ensuring that we put into place a good tax system for all (including multinationals), a good sovereign debt management system and provide strong support for entrepreneurs to create jobs. These things need to be done now, while the times are still good.
The Patriotic Front’s successful 2011 election slogan “more money in your pockets” claimed many fans because many of our people are short-sighted. I hope it is obvious to all now: it was nothing more than a political ploy. The mantra can work if good economic management leads to steady long-term growth and wages. But in PF speak, it simply meant creating more debt to provide “more money”, as we are currently seeing with the unsustainable civil servants’ wage increases. All of this begs the question: were people asking where that “more money” was coming from? I doubt it. Ordinary men and women and their families will be the ones to bear the burden of the inevitable repayments to come. Future governments will be forced to invest less money into schools, roads and hospitals.
Despite the government’s dismal financial management so far, I believe there is still some goodwill amongst Zambians for President Sata and his government to succeed. I share the same view. I want the government to succeed. But to justify a growing debt stock with “we are in a hurry to develop” (Miles Sampa, then Deputy Finance Minister, speaking in April) is simply folly. We know that good economic policies cannot be created in a political vacuum. But unhelpful political biases and careless management of the economy should never dictate economic decision making.
See the Zambian Economist for more on the Zambian debt situation and the 2014 Budget speech.