Economist Yusuf Dodia Identifies Critical Challenges and Calls for Strategic Reforms

Economist Yusuf Dodia has issued a cautionary message regarding Zambia's economic stability, emphasizing that the country must address the root causes to pave the way for increased economic growth.

Dodia highlighted the importance of aligning the ambitious goals set in the 2024 National Budget with the prevailing economic realities.

He observed that approximately 15 percent of the budget relies on foreign funding and financing, while domestic financing, sourced through borrowing from the local economy via treasury bills and bonds, constitutes around 20 to 30 percent. This, according to Dodia, underscores the inadequacy of the Zambia Revenue Authority's (ZRA) resource mobilization target to cover the entire budget.

In 2023, the ZRA aimed to collect about K110 billion, yet the 2024 budget has surged to almost K180 billion, leaving a considerable shortfall of approximately K70 to K80 billion in the national budget.

The economist pointed out that the nation currently exerts less control over its resources than necessary, citing challenges such as the depreciation of the kwacha, high fuel prices, and escalating electricity tariffs, all contributing to increased business costs in Zambia.

Dodia questioned the decision to commercialize and privatize the energy sector, expressing uncertainty about its efficacy. He suggested that if pursued, these efforts should be led by the government or a state-owned entity.

Highlighting concerns about the electricity tariff determination process, Dodia noted that the government seeks to make electricity more affordable to boost economic development. However, the tariffs are set by investors through power purchase agreements with Zesco, leading to potential challenges.

A high power purchase agreement, Dodia explained, compels Zesco to raise tariffs on the Zambian population, hindering economic development. He urged a reevaluation of the energy policy, drawing attention to the experiences of European economies facing recession and Asian economies with robust GDP growth above 6 percent due to their control over the energy sector.

Dodia stated that, without intervention, achieving economic growth above 4 percent would be challenging, and the country could face a sluggish economy hindering progress.