IRIN Focus on economic reforms

It is midday in the Zambian capital and the motley crowd outside the Ministry of Finance headquarters is getting discernibly impatient. “Maybe we should storm the minister’s office,” a frail looking man suggests hopelessly. His colleagues, who like him wear threadbare clothes and faces of quiet resignation, do not bother to respond. They have been here before, more times than they care to remember, and they know the drill; the finance minister is too busy to see them and, if they get unruly, as they are inclined to, the police will be called to drive them away. The shabby 50-odd men and women clustered outside the plush ministerial offices represent some 1,200 former employees of Lint Company of Zambia, a loss-making enterprise that the reformist government of President Frederick Chiluba sold off under an ambitious privatisation programme in 1991. The company did not fare any better in private hands; cheap textiles imports, coupled with a surge of second-hand clothes from Europe, forced it into receivership four years ago. The government promised to give the affected workers redundancy packages when the company went under, but they are still waiting for their dues. “We are fed up of the government’s unfulfilled promises,” says Moses Mwanangombe, the ex-workers’ unofficial spokesman. “Many of us would like to go back to our villages to farm, but it seems unlikely that we will get our dues before the rain starts.” The groups’ plight represents the lot of tens of thousands of people who have been rendered destitute by a decade of a far-reaching, donor-backed structural adjustment programme. Zambia’s economic reform programme, said by observers to be one of the most stringent on the continent, has recorded some impressive gains since it was launched 10 years ago - on paper, at least. The macro-economic figures are certainly impressive: annual inflation remains relatively low at 20.2 percent, and is expected to drop to 17.5 percent by the year-end. The local currency, the kwacha, which soared to a record high at 4,400 per US dollar last year, has remained steady at around 3,600 over the past few months. At the same time, the country’s international reserves, which were targeted at the equivalent of two months import cover, have crossed the three months threshold at US $264 million. However, the lot of the ordinary Zambian has never been grimmer. Unemployment levels have risen steadily, largely as a result of a public service restructuring exercise to cut the government’s wage bill. In addition, jobs have also been lost as scores of small and medium-sized businesses fold in the face of fierce competition within a new liberal trade culture. At the same time, the delivery of key social services continues to suffer from under-funding, administrative lapses and poor output by disgruntled government workers. The inadequacies of Zambia’s economic performance are glaringly apparent in its statistics: an estimated 80 percent of the country’s 1.3 million people live on less than US $1 per day, life expectancy stands at around 37 years. Moreover, analysts say the impressive figures bandied about by government officials are often misleading. While they point to a gradual turnaround in the country’s economic prospects, the truth is that many of the gains the figures project are unsustainable, they say. For example, while the country has seen a rise in its international reserves in recent months, it continues to pay out more than it receives. According to the central bank, convertible currency inflows, including export earnings and donor aid, totalled US $63.9 million during the first six months of the year - but outflows totalled US $92.7 million, with debt servicing accounting for 37 percent of the disbursements up to April. The other key macro-economic signals are equally misleading: for example, the relatively low level of inflation since the beginning of the year is, analysts say, a reflection more of structural weaknesses than of economic strength. “It (the inflation rate) is currently seen to be benefiting from the imperfections obtaining in the agricultural marketing structure, where price increases in maize grain are not being fully translated into price increases for maize meal,” Citibank Zambia said in a monthly economic bulletin. Similarly, the relative stability of the kwacha is more a result of official intervention than of a healthy trade balance. Early this year, the central bank cut the commercial banks’ open position limit - the amount of convertible currencies they can hold - from 25 to 15 percent in a bid to arrest the slide of the unit. It also compelled major hard currency suppliers to transact through the central bank, which effectively sets the rates, instead of through the open market. “These moves were largely aimed at discouraging speculators, but they still represent an effective return to a measure of exchange controls,” says Citibank spokesman Ignatius Chichi. Meanwhile, as the experts try to read meaning into the macro-economic figures, the average Zambian is preoccupied with more pressing issues. Last year, as in the two preceding two years, Mwanangombe and his former work mates celebrated Christmas Day playing checkers on empty stomachs under a tree to call attention to their plight. “At the rate the government is moving, I suspect we will spend this Christmas, too, under a tree,” he says.