The economic space in Zambia was set alight following the announcement of Dr. Bwalya Ngandu as the new Finance Minister of Zambia. For months, the fiscal side of the economy had grappled with echoes of economic frustration that ranged from lowering Country Credit ratings due to the performance of our Eurobonds (considered now as the proverbial barometer of Zambia’s economic fitness, which Financial Insight disagrees with largely because it has been based on sentiment, but that’s another story) to debacle over the protracted roll out of a General Sales Tax (GST) that would see the back of a Value Added Tax (VAT) regime that had proved a headache among other things.
Nostalgic pundits over the last couple of months had questioned the Honourable Margaret Mwanakatwe’s fitness for the role. Remember, she held the highest positions on the corporate side of the financial equation with a stint as Commerce Minister prior to her reign as Finance Minister. Respect. However, grappling with the sales tax implementation would be her last act as Finance Minister.
In her last speech to parliament on the matter, she said “Sir, as you may be aware, the Bill is yet to undergo parliamentary procedures which include second reading, committee stage and third reading. Once passed by Parliament the Bill has to undergo Presidential Assent. Clearly these processes cannot be completed before the stated date of 1st July 2019. To this end Mr, Speaker, I wish to inform this House and the nation that the implementation date for sales tax has been moved to 1st September, 2019.”
What few will remember is that as ‘pilot’ of the fiscal consolidation framework, Hon. Maggie had actually done quite a substantial amount of work. This was made clear in Dr Ngandu’s opening remarks as he presented what should have been Hon. Maggie’s Q2 announcement on the state of the economy on 17th July 2019.
“May I begin by thanking you for joining our second quarter economic brief. As this is my first meeting with the Press, I want to take this opportunity to thank my predecessor, Hon. Margaret Dudu Mwanakatwe, MP, for the work in formulating the fiscal consolidation framework”, read Finance Minister’s inaugural update on Economic Development on 17th July 2019 at the Ministry of Finance in Lusaka when he addressed the press.
Poetic justice as it may sound, Bwalya emanates from the monetary policy voice that has whispered into the fiscal ear of the technocrats at the Finance Ministry. One would imagine that this voice was further amplified by the presence in Dudu’s team of Dr Pamu Mulenga who is an alumni of the Central Bank appointed by the President only weeks after the ink on Maggie’s appointment letter had dried. Dr Mulenga was appointed Budget and Economic Affairs Permanent Secretary. Therefore, the reunion of Doctors Ngandu and Pamu signals the convergence of Monetary Policy with Fiscal Policy thought process as they consolidate to address the following issues that Dr. Ngandu pointed out in his speech:
- The first task is to achieve fiscal sustainabilityby reducing the deficit over the medium term to sustainable levels of 3 to 4 percent of GDP. In this regard, I will ensure that we enhance measures to achieve fiscal restraint or consolidation, by implementing well targeted expenditure measures.
- The second, and related task, is to increase our capacity to mobilise resources. This will entail increasing efficiency in collection of tax revenue and fixing leakages in Non-Tax revenue collections through increased use of IT solutions.
- Another priority will be ensuring debt sustainability, which is cardinal in reducing fiscal risks and vulnerabilities. Our main focus will be to enhance the pace at which we will be implementing the austerity measures that were pronounced by Cabinet;
- Dismantling of arrearsowed to suppliers and contractors will be another important task. We need to commence implementing a calculated strategy towards dismantling of arrears to ease liquidity in the market, improve financial sector performance, get businesses to operate smoothly and reduce lending rates to get the economy back on a higher growth path.
These are key arrears that the Monetary Policy side of the economic equation has been promulgating over the last couple of quarterly Monetary Policy announcements. At a recent event that Financial Insight was privileged to attend, Governor Denny Kalyalya indicated that “round table discussions” with the fiscal side were on going. Therefore, when international capital markets reacted positively to the announcement of the new Minister, one would argue that they see what Financial Insight sees. Convergence.