Monday, May 20, 2013

Subsidies costly, says Chigunta

By Gift Chanda
Sun 19 May 2013, 14:00 CAT

DR Francis Chigunta says it is important for the government to show Zambians alternative social protection measures being put in place after removing subsidies on fuel and maize consumption.

And Dr Chigunta, who was former president Rupiah Banda's political advisor, says there must be a strong basis for the government to maintain consumption subsidies because they tend to be very costly anywhere in the world.

Commenting on the government's decision to scrap the miller-consumer subsidy on maize barely a month after the fuel subsidy that had kept fuel pump prices stable for over a year was removed, Dr Chigunta, a Development Studies lecturer at UNZA, said a lot of money would be saved.

He said consumption subsidies anywhere in the world tend to be costly.

"However, it is important to take into account the plight of the poor. The majority of Zambians are poor, therefore, as government removes this subsidy, it also needs to show the public the alternative measures that they have come up with in order to cushion the impact of this removal of the consumer-miller subsidy," Dr Chigunta said in an interview.

"We are appreciate and understand the government's position that the consumer subsidy is costly. Indeed it is costly and in the long term it will be beneficial to the Zambian treasury because it is a move that will help save money and that money will be used for other productive activities."

He explained that people may experience the negative impact of removing the subsidy and this was why it was important for the government to show the people what alternative social protection measures they were putting in place.

Dr Chigunta explained that the negativity around the removal of the miller-consumer subsidy was because the decision was made when people had not completely adjusted to earlier policy change on fuel and the proposed electricity tariff hikes.

"When you combine all these, the impact on the poor will be quite adverse. So government must engage in an exercise that will cushion this impact," said Dr Chigunta.

"But subsidies anywhere in the world tend to be costly and there must be a good reason for maintaining them. As a country, we need to look more on subsidies that promote production and not consumption because that is where we can have a competitive advantage as a country. Countries that have succeeded elsewhere in the world have tended to subsidise production and not consumption."

And Evelyn Hone College Students Union president general Inambao Sitwala said the removal of consumption subsidy on maize would create a sense of responsibility.

He said the move was welcome and would enable the government speed up infrastructure development in all parts of the country that had been neglected for many years.

"Statistically speaking, the country has been losing about K300 billion on subsidies and its removal means the money will be used to other important areas and this will help reduce the gap between the poor and the rich as the money will be used to uplift the living standards of our people as there will be a trickledown effect," said Sitwala.

Meanwhile, Zambia Youth Networks secretary general Mathew Mushikiti said those opposing the removal of the maize subsidy were going through an orientation process.

He said maintaining subsidies would not help the country develop economically.

"Subsidies kill the spirit of innovation, saving and sense of innovation and service and as long as government maintains this we should forget about economic development," said Mushikiti.

And UPND leader Hakainde Hichilema said the removal of the fuel subsidies was a wrong decision.

And NAREP president Elias Chipimo said Zambia needed a political consensus that was built on values and a compelling vision for development that placed people at its very centre.

He said the decision to remove the subsidies would hurt many poor Zambians.

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