REMOVAL of fuel and electricity subsidies may create the availability of money in the national budget which can be spent on other priority sectors such as health and education, says Economics Association of Zambia (EAZ) president Chrispin Mphuka.
EAZ has, however, called for Government to come up with safety nets to assist ordinary citizens who will be impacted as the cost of living and doing business will increase.
Dr Mphuka said in an interview that the removal of subsidies would have two adverse impacts with the first one being the creation of readily available funds in the national budget.
He explained that the available funds would help in closing the gap between revenues and expenditure in the national budget.
“The removal of these subsidies will have two effects. The first effect is that it may create money in the budget available to be spent to other priority areas and maybe help in closing the gap between revenues and expenditure in the national budget.
“Some of the areas money to be channelled is education and health. Development is all about the state of the people including healthy lives,” he said.
Dr Mphuka also said removing subsidies on both fuel and electricity would impact on majority of Zambians as prices in the transport and power sectors would rise.
“Clearly, subsidies of that nature would impact negatively if graduated and progressive. It impacts more on the poorest of the poor.
“The public in terms of prices might be affected as electricity and fuel has this generalised effect, so you may end up having higher prices which would impact negatively on individuals,” he said.
He has since called on the Government to come up with safety nets to help citizens once the subsidies were removed.
“At the same time ensure that there are safety nets. If prices go up, then the poorest must be given that safety net. Use what you have saved to make the poorest a little better off.
“But on the other side, it has an effect of increasing the cost of doing business. Commercial farmers are affected more because they use a lot of electricity,” he said.
President Lungu early this week announced that Government would have to do away with unnecessary subsidies especially in the electricity and fuel sectors to improve the economic outlook in the next five years.