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Zambia: Decisions with unintended consequences?

Asumani Guloba's picture

Since the start of 2012, expectations in Zambia have been running high: stable economy; a newly elected government; recently crowned African football champions.  Everything seems possible.  For the new government, fulfilling election promises will require well thought through development decisions. Are the decisions taken so far having the intended consequences?

The Zambian economy has been remarkably resilient, with growth averaging 6.6% in the past five years, supported by strong macroeconomic policies, high copper production and favorable prices. End-year inflation has been in single digits for four of the last five years, the debt and fiscal positions well within sustainable levels. In addition, since independence, the country has witnessed five peaceful elections leading to four changes in government. These factors auger well for the future economic prospects of the country. Or do they?

 


Source. Central Statistical Office, 2012

 

Source. Central Statistical Office, 2012

 

While affirming Zambia’s sovereign rating to B+, Fitch recently downgraded its outlook from stable to negative. They cited the populist stance of government in hurriedly reversing the sale of 75% government stake in ZAMTEL to Libya’s LAP green Networks for US$257 million that was deemed as corrupt, without compensating the investing party, and other recent public announcements. There have been several seemingly uncoordinated public utterances and actions ranging from setting up commissions to investigate dealings of past governments to changes in civil service.

 

Understandably the new government has been responding to its election promises of revisiting fraudulent dealings of past regimes and more importantly setting a mark as a government that will not tolerate corruption.  But backward-looking actions will not by themselves address Zambia's development problems.  Unless accompanied by forward-looking policy reforms, they may send adverse signals to investors and, ultimately, the Zambian citizens, whose expectations are high.  Now is the time to start signaling rightly.