Lusaka - God save the kwacha.
That’s what Zambian President Edgar Lungu wants his people to pray for on a national day of devotion and fasting on Sunday to reverse a decline in the world’s worst currency and fix a litany of problems from plunging copper prices to electricity shortages.
All bars, nightclubs and entertainment venues have been instructed by the government to shut on the day, while the Football Association of Zambia has cancelled domestic games. Church leaders are rallying their members to heed the president’s call in a nation where more than 80 percent of the 15 million population are Christian.
“These days are like the last days,” Gordon Chanda, a driver for a law firm, said as he sipped a Mosi beer at Sylvia’s Comfort bar, taking cover from a heat wave that hit the capital, Lusaka, this week. “We need more prayers.”
Lungu, 58, is seeking divine intervention to help an economy in crisis as government efforts fail to halt the kwacha’s 45 percent slump against the dollar this year, the most of 155 currencies tracked by Bloomberg. Zambia’s woes began with the slide in copper prices last year and has worsened in 2015 as falling water levels at hydropower plants triggered the most severe electricity shortage on record, hobbling businesses.
“Anxiety and distress prevail throughout the land,” Lungu said last month when he proclaimed the day of prayer and fasting. “Indeed, hope seems to have deserted the minds of the people. It is almost as if the wise counsel of the learned among us are not a match to the crisis before us.”
Job cuts
The kwacha fell 0.3 percent to 11.715 against the dollar as of 1.10pm in Lusaka on Friday. Yields on the Eurobond due 2027 have climbed 236 basis points to 11.73 percent since it was sold in July.
Copper prices have dropped more than 20 percent in the past year, prompting companies such as Glencore to consider shutting mines and fire thousands of workers. Zambia is Africa’s second-largest producer of the metal, which accounts for 70 percent of export income. The slump in the industry will curb economic growth to a 17-year low of 3.4 percent in 2015, according to estimates from Barclays.
Zambians have been forced to endure power cuts of as long as 14 hours a day in Lusaka as drought caused water levels to drop at Lake Kariba hydropower plants, which supply the nation with almost half of its electricity. Dry weather has also caused a 22 percent slump in production this year of corn, the staple food, boosting inflation.
Ballooning debt
Bishop Joe Imakando of the Bread of Life International Church, housed in an opulent building across the road from one of Lusaka’s biggest townships, urged Zambians to pray for an improvement, referring to a call by King George VI of Britain in 1940 for a national day of prayer during World War 2.
“The depreciation of the kwacha against the dollar has resulted in prices escalating by 30 percent to 100 percent,” Imakando said in a statement on the church’s website. “Efforts by government to reverse the situation have not yielded any fruit. The impending increase on fuel will cause yet another price escalation, which will further complicate matters. What we need is divine intervention!”
Fighting accusations of mismanagement of the power and economic crises, Lungu may be seeking a way to deflect criticism.
Since taking office in January following the death of his predecessor Michael Sata, Zambia has been beset by policy uncertainty and a weakening in spending controls that’s led to ballooning debt. The government has steadily raised its target for the budget deficit this year from 4.6 percent of gross domestic product to 6.9 percent.
While Finance Minister Alexander Chikwanda pledged in his budget speech on October 9 to bring the deficit down to 3.8 percent of GDP in 2016, market analysts and credit-rating companies such as Fitch Ratings have raised doubts, since spending is projected to soar 14 percent.
“No matter how many prayers you make it doesn’t change the fact that you have a fiscal deficit and you’re not doing anything to reduce that fiscal deficit,” Trevor Simumba, managing director at Sub-Saharan Consulting Group Zambia, a business advisory firm, said by phone from Lusaka. “We know God can do miracles, but He cannot change things that are facts on the ground.”
BLOOMBERG