The PF government is not committed to fiscal consolidation. It was apparent almost three years ago that decisive fiscal measures were urgently required to stabilise the economy. However, political expediency ruled out any timely intervention.
Despite mounting exogenous shocks due to the fall of copper prices, the PF fiscal policy remained laxly. Instead of a fiscal consolidation, reckless spending, funded through enhanced borrowing, became the norm.
A corruption ridden infrastructure rehabilitation programme was implemented without recourse to the changing and dire economic situation the economy had found itself in. The appetite for luxurious and unnecessary spending went unchecked. So did the parasitic relationship of the ruling elite on the state coffers.
In addition, the PF government objected to any form of fiscal consolidation before the August 2016 elections. Any fiscal consolidation was viewed as carrying a risk of infuriating the voters. Action, if any, had therefore to wait till after the elections.
This proved disastrous for the economy. To maintain any semblance of sanity, monetary policy had to be out-stretched. Tight liquidity and the use of administrative measures, in the absence of complimentary fiscal measures, led to a liquidity crunch and added immense stress on the banking sector. The proportion of Nonperforming loans rose; Industry and the masses of the Zambian people were also severely impacted.
Worse, public debt was allowed to grow unchecked. Within a period of three years, some extra $3 billion were added to the external debt whilst high domestic borrowing continued to crowd out lending to the private sector.
One year after the 2016 elections, fiscal policy is still ambivalent, murky and indecisive. It continues to create uncertainties. This is not conducive for securing sustainable livelihoods for the Zambian masses. Neither is it sending the appropriate signals for the much hyped about private investment and growth. We are dealing with the most incompetent government this country has ever produced.