PRESIDENT Lungu has provided guidance on monetary and fiscal policy measures designed to stabilise the market by directing the Ministry of Finance to closely monitor the trade imbalances which are leading to volatilities of the Kwacha.
The President further says about US$120 million has been injected into the market to help stabilise the Kwacha and pay for critical services such as health, education, water and sanitation and infrastructure-related development.
The head of State also expects the Industrial Development Corporation (IDC) to raise an initial US$500 million to invest in the energy sector and other related infrastructure development following Cabinet’s resolution to transfer shares from the Ministry of Finance to IDC on August 24 this year.
President Lungu said this through his special assistant for press and public relations Amos Chanda at a press briefing at State House in Lusaka yesterday.
“The Kwacha depreciation has in the recent past accelerated largely due to the trade imbalances that we are experiencing because the imports, are in excess of the exports which have reduced both in volume and value.
“I, therefore, direct the ministries involved in economic management, particularly the Ministry of Finance, working together with the Bank of Zambia (BoZ), to closely monitor the situation and keep me constantly and frequently appraised,” he said.
Mr Lungu urged all small, medium and large entrepreneurs to increase production of various goods that can be exported to reduce the trade deficits.
The President has also directed all Government institutions to rationalise and minimise in all areas that engender foreign exchange costs.
The President enjoins the private sector to reduce foreign currency related expenditures.
Mr Lungu has strongly appealed to commercial banks to be proactive and be on alert for the many leakages and other illicit outflows without being prodded or policed by the BoZ.
He said there should be a bold drive to increase the levels of production and processing of a wide range of things that are within the country’s reach to reduce unnecessary imports.
“A depreciating Kwacha to unnecessary levels has severe cost implications for a country like Zambia, which imports a lot of its requirements, some of which are excessive. The low Kwacha also compounds our external debt serving,” President Lungu said.
President Lungu said the depreciation of the Kwacha is not unique to Zambia as this is happening to other currencies like South African rand, Tanzanian shilling, Ugandan shilling and the Ghanaian cedi.
He said the decline in copper prices has impacted adversely on the Zambian economy, thus the need for Zambia to diversify the economy to reduce dependence on copper.
President Lungu said the movements in the exchange rate are sending clear signals that Zambia’s economy needs an expanded export base and a reduction in unnecessary imports.
“In recent days, we have seen acceleration in the depreciation of the Kwacha against the major currencies. The increased volatility appears to be reflecting market panic more than underlying fundamentals,” he said.
On power deficit, President Lungu said: “This is what I think about everyday and I want you to know, I want the nation to know that no-one feels the anguish of these disruptions more than I do. My Government is doing its very best to alleviate the suffering of our people.”
In the interim, he has sanctioned a series of remedial measures, including importation of power to contain shortfalls.
He said in the medium and long term, he wants to see determined and expedient efforts to promote investment in alternative power schemes which have short gestation of six months to a year.
The President is hopeful and confident the adjustment of the tariff to 10.35 cents per kilowatts per hour will spur investments.
President Lungu has instructed Zesco to quickly identify and contract firms that are offering the lowest cost of generation for solar, which also allows the power utility company to earn a profit.
“I am fully aware of firms that have over the years been offering alternative energy solutions at prices lower than the current tariffs with the benefit of long-term concessional funding which would allow Zesco to own the facility upon finishing construction and not require subsidies from the treasury,” he said.
The head of State said Government’s desire is a Zesco that is profitable, reliable, self-sufficient and does not rely on expensive measures such as the importation of power outside the country or buying power at expensive prices from independent power producers.
President Lungu said Zesco is undertaking several measures to reduce the power deficits.
He said Government has signed a contract with Aggreko, an independent power producer (IPP), for the supply of emergency power of up to 148 megawatts with effect from September 1, with an additional 40mw to be available by January next year.
President Lungu said Government is currently negotiating with another IPP for the supply of an additional 150mw, which will be available by January next year.
Mr Lungu has appealed to all users of electricity to practise energy efficiency during this period.
And the President regrets that there are citizens who have a “field day” when the country experiences difficulties which arise from external factors.
He said the challenges the country faces today are real and unprecedented and should not be reduced to mere political rhetoric.
“While I take the lead in providing decisive solutions to these challenges, I ask Zambians irrespective of political affiliation or any other interests to unite and come together so that we as a nation can pull through these challenges,” President Lungu said.
He said nobody, including Government, has magical solutions to the challenges country is facing today.