Zambia Must Sacrifice ‘Cheap Popularity’ to Remove Subsidies

Zambia, Africa’s biggest copper producer, must avoid an unsustainable “regime of subsidies,” Finance Minister Alexander Chikwanda said, after the government scrapped support for fuel this month.

The government will resist the “cheap popularity” that subsidies provide because this will become too expensive, Chikwanda said in an interview today in Lusaka, the capital.

Zambia removed a subsidy on fuel prices from May 1 after President Michael Sata estimated it would have cost the Treasury about 1.1 billion kwacha ($207 million) this year. The move may boost transportation costs, and some taxi drivers in the northern Copperbelt province stopped operating in protest, the Lusaka-based Post newspaper reported. The state also subsidizes fertilizer for corn farmers and buys their crops for a higher price than it sells them for.

“Whether it’s fuel, whether it’s electricity, whether it’s anything; no subsidies,” Chikwanda said. “It’s not good for the Zambian people. Government is not here to preside over fiscal irresponsibility. We have so many huge tasks before us but the resources are very limited.”

Zambia will increasingly “seek recourse” from capital markets to boost economic growth, which needs to be more than 10 percent a year to cut poverty, Chikwanda said in a speech in the city. The economy grew by an estimated 7.2 percent in 2012, according to the central bank. Copper accounts for about 70 percent of Zambia’s export earnings, while corn is the staple food.

The southern African nation plans to follow last year’s sale of $750 million of dollar securities with a $500 million to $1 billion offering in 2013 to help finance infrastructure projects, Deputy Finance Minister Miles Sampa on April 19.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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