The termination of the contract of the Bank of Zambia Governor, Dr Denny Kalyalya, with immediate effect by President Edgar Lungu comes at a wrong time and will have huge negative repercussions for macroeconomic stability.
Dr Kalyalya and his BOZ team were the opiate doses for a critical ill Zambian economy. Beyond a certain level of pain, opiates and other painkillers are ineffective. The patient is then exposed to excruciating pain and death.
On several occasions, we had warned against the overstretching of the monetary policy tools in trying to respond to structural and fiscal policy failure. By 2013, it was already apparent that the Zambian economy needed deep fiscal consolidation. All signs of pending economic stress were ignored. It was business as usual. By 2015, the situation was getting out of hand and various variables pointed to policy intervention that would ensure pro-poor growth whilst working towards macro economic stability. We provided suggestions on many occasions as to how this could be achieved.
All this advice was arrogantly ignored. We further warned the Zambian cooperating partners that they were also failing to read the pending economic disaster awaiting the country. They all sheepishly gave in to allow President Lungu pursue a corrupt and ruinous policy that was meant to secure him and the PF the 2016 General Elections!
Once on this path, there was no return to sanity. The economy was on autopilot. Four years later and with the 2021 elections pending, monetary policy tools have been rendered irrelevant to effect drastic change.
Dr Kalyalya is by far one of Zambia’s finest economists. He understands the potency of monetary policy tools but is also clear about their limitations. Much more important, he is a sober and objective personality. These are qualities lacking in most Zambian economists. His appointment as Bank Governor was always seen as a panacea to the otherwise misinformed and rogue policies of President Lungu’s regime.
However, it was just a question of time as to when frustration would set in. Ironically, President Lungu lost the patience instead. The President wants to win next years elections at all costs. Even if this means a total destruction of the Zambian economy. Dr Kalyalya therefore had to go. He had become a stumbling block in an evil machinery that is destroying the entire Zambian society and economy.
To Dr Kalyalya: Please take a well deserved rest. You have served your country diligently and with a lot of civil courage. The Socialist Party appreciates your efforts – even if at times we never agreed with some of the policy decisions taken by your team.
To Presidemt Lungu: macro economic instability will be your ruin and that of your government. You have destroyed the Zambian economy in the shortest period of governance. The termination of Dr Kalyalya comes at a time when COVID-19 is causing economic havoc to an already depressed, high debt economy. You have mistimed and this will have a huge negative impact on the financial market for months to come. As expected you continue failing our country where and when it matters most.
Dr Cosmas Musumali
General Secretary and First Vice-President of the Socialist Party