ECONOMIC AUSTERITY- MY INTUITIVE VERDICT
By Chibamba Kanyama
– Austerity measures have come too late to have significant impact.
– Austerity measures work against a backdrop of strength not weaknesses.
Before I register my verdict regarding the ongoing economic austerity measures introduced by Cabinet, here are my four take-always:
1. Austerity measures are real, government serious and somehow focused- and entire industry, including private sector, already beginning to feel the heat.
2. Austerity measures unavoidable under the circumstances
3. There, however, appears to be no defined system of economic measures around austerity: some level of uncertainty and confusion quite evident.
4. The austerity measures have come quite late and too little to have significant impact.
My verdict is merely intuitive; not supported by economic data. The very reason IMF-backed structural adjustment programmmes failed was because they came into effect when the options for economic revival were minimal. Austerity works well against a backdrop of strength and not weakness; strong liquidity reserve position and not low liquidity position.
Think in terms of an individual with plenty of money. Frugality works well when you have money because your options to manage it are plenty and usually manageable.
Egypt, with Joseph as Prime Minister, managed austerity during the years of plenty. They collected grain in anticipation of lean years. The impact was significant and effective. If austerity happened during the years of lack, it would have been termed starvation.
Botswana introduced austerity years ago, at one time building reserves for two year import cover. It was a very frugal economy, underinvesting in the social sector particularly education until about 25 years ago. The positive is it can still manage austerity measures today, embark on infrastructural investment without any significant negative impacts to the economy.
In other words, the best time to exercise and gym is when you are healthy and not battling blood pressure. The body responds effectively when it’s on a course of prevention and not in a position of managing.
In short, real austerity is about taking economic measures to prevent an economic problem. In our case, it is about coming out of an economic problem so, the measures should be termed, ‘survival economic measures’.
That way, we should go beyond cutting down on expenditure. If there is little or no money, you are forced not to spend.
Purely as an analogy to drive my point, if you are poor, you cannot say you are reducing spending, you simply don’t have.
Our measures should be focused on activities that can jumpstart economic activity. We need to generate money (and this goes beyond strengthening revenues and reducing expenses).
It’s about attracting and boasting investment. That is where we need to focus our energies and this goes with attractive investment policies, consistency in policy, consistency in administration of overall national laws, mobilization of domestic resources for public and private investments and completely cutting down on acquisition of debts. This is the medication appropriate for Zambia for economic revival and we shoul