April 25, 2002
Economic struggles - Cholera outbreaks
An attempt by the Zambian government to restore economic stability and
stimulate growth appears to have backfired, throwing investors into a flurry of
concern and stimulating the underground currency market, analysts said on
Thursday, April 25. They said recent significant gains in the exchange rate of
the kwacha, a unit well known for its propensity to slide, were a response to
official controls rather than a return to macroeconomic stability. The kwacha
gained 6,6 percent against the American dollar two weeks ago and continued to
strengthen in the days that followed.
Analysts said that was unusual in an environment in which the unit was
under pressure from an exceptionally high grain import bill and from growing
investor unease over the country's economic prospects. Market watchers
attributed the kwacha's sudden strength to a new central bank directive
compelling commercial banks to post their buying and selling rates at no more
than two and four percentage points respectively above its own dealing rates.
They added that the bank's intervention had already begun to revive the black
currency market, which all but collapsed when the reformist government of
former president Frederick Chiluba lifted exchange controls in the mid-1990s.
Citibank Zambia reported that the formal foreign exchange market "remained
comatose" as dealing rooms became "increasingly reluctant" sell their
convertible currencies following the central bank directive. "This has been
exacerbated by the emergence of a parallel market for corporations and
individuals that is trading at 4,300 kwacha against the greenback," Citibank
said in a daily market bulletin. "Generally traders in most dealing rooms are
twiddling their fingers and hoping for the Central Bank to intervene ... But so
far, the Bank of Zambia dealing window has remained closed for almost two weeks
now and the formal market is becoming increasingly short," it added. The kwacha
was selling at slightly below 4,000 per dollar on the formal market.
Economic observers say the government's intervention in the currency
market is symptomatic of - and as futile as - its overall response to the harsh
economic realities the country is caught up in. They warn that many of the
economic policy reversals the new government has effected, including a partial
return to protectionism, may prove counter-productive or unsustainable. The
government announced early in April that it would ban a range of Zimbabwean
goods, including cigarettes, alcohol and agricultural products, that it said
were being dumped by Zambia's more powerful neighbour. An unprecedented
economic crisis across the border brought on by investor and donor capital
flight have seen the Zimbabwean currency trading on the black market for as
little as seven times its official rate. This has enabled Zambian traders to
buy dollars and purchase Zimbabwean goods for less than they cost to produce in
Zambia. The Zambian government says it is determined to curb the dumping.
"Before the end of this month we will put in place a statutory instrument to
ban some imports from Zimbabwe because they are harming our local producers,"
Agriculture Minister Mundia Sikatana told reporters.
While the Zambia National Farmers Union and the Zambia Association of
Manufacturers have applauded the government's plan to curb dumping, some other
observers fear it would be retrogressive. "We totally condemn the ban of
imports from Zimbabwe. The ban will just deprive the consumer of affordable
products and access to a variety of products," Zambia Consumer Association
executive director Muyunda Illilonga said. The average consumer certainly has
cause to worry. According to studies by the Jesuit Centre for Theological
Reflection (JCTR), a church-backed NGO, most Zambians already cannot afford
essential commodities. A JCTR report released this month reveals that, whereas
a family of six in Lusaka requires about 823,000 kwacha (about US$205) for
basic items per month, most workers earn less than that. Many, including some
police officers and security guards, earn as little as 120.000 kwacha.
Mwanawasa's government has, in its first four months in office, taken
some concrete steps to alleviate the plight of the poor - estimated at around
80 percent of the country's 10,3 million people. Among other things, it has
scrapped cost-sharing fees in primary schools and set aside resources for free
inputs for the poorer peasant farmers. Whether or not it will be able to raise
the required resources remains to be seen. Recent unpredicted events, including
a shock decision by leading mining house Anglo American to cut back on its
investment in the country, are expected to shrink the economy further as job
losses mount and export earnings drop. At the same time, a severe grain
shortage will compel the government to divert much of its scarce resources to
importing food. Zambia is facing a maize shortage after a crop failure in the
2000-2001 season when output fell by an estimated 30 percent, falling well
short of the 700,000 mt needed annually. The Zambia National Farmers Union
anticipates more grain shortages this year following erratic rains in the
2001/2002 growing season. Maize is the staple food for millions of Zambians.
Earlier this week it was reported that a cholera outbreak in northern
Zambia has killed 13 people and infected at least another 120. Thirteen
people have so far died since the disease broke out," the spokesman for the
central board of health, Ben Chirwa, said. "We have had 120 cases reported
since the disease broke out recently." The infections were reported in the
northern Zambian districts of Mbala, Mpulungu and Mambwe, situated near the
border with the Democratic Republic of Congo (DRC). Chirwa said the ministry of
health had set up centres to treat people who had contracted cholera to avoid
the disease spreading. Lack of clean drinking water in the affected areas has
been identified as the major factor behind the outbreak. (IRIN / THE NAMIBIAN)
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