The Bank of Zambia (BoZ) has unveiled responses the country is taking to ease the impact of the prevailing global financial crisis on the Zambian economy.
Bank Governor Caleb Fundanga said at a quarterly media briefing today that the Bank of Zambia has significantly increased the supply of foreign exchange on the market.
Dr. Fundanga said, in the fourth quarter of last year, the central bank made a net sale of US$230.5 million to the interbank market.
He said the bank has also improved its information inflow by continuously interacting with banks for detailed information regarding foreign exchange transactions.
“The BoZ has also engaged major business entities to understand their expected foreign exchange requirements. This is necessary to ensure market constraints are addressed expeditiously.
He added that the bank has further engaged other regulatory authorities in an effort to stem the growing trend of dollarisation in the country, which he said would destroy the economy if left unchecked.
Dr. Fundanga said the Bank of Zambia has in the same vein issued directives to commercial banks, prohibiting the extension of loans and credits and the provision of other resources through the local currency, the Kwacha, to non residents.
“This measure is aimed at addressing volatility in the exchange rate of the Kwacha against major foreign currencies. In this regard, government is expected to issues a statutory instrument,” he explained.
The BoZ governor added that government has also put up some tax policy measures to respond to the effects of the global financial crisis, citing steps to maintain a prudent fiscal policy and continue to encourage investment in the economy among others.
He said these measures would support export diversification through interventions in the agriculture, tourism, and manufacturing sectors.
“To ease the adjustment to the external shock Zambia has experienced and support bank of Zambia’s ability to maintain orderly foreign exchange market conditions, cooperating partners have also made commitments to sustain and where possible augment the levels of financial support,” he said.
In another development, Dr. Fundanga today told journalists that the International Monetary Fund (IMF) mission visited Zambia in December 2008 to review the Poverty Reduction and Growth Facility (PRGF) programme which was approved in June of the same year.
He said the IMF mission and the Zambian authorities agreed on the macroeconomic targets for the medium term and structural measures for 2009.
“The mission observed that following an extended period robust expansion, economic growth in Zambia was slowing as a result of the global crisis,” he said.
Dr. Fundanga however said the IMF noted that Zambia’s strengthened macroeconomic position in the past few years had provided a solid basis from which to adjust to the weaker external environment.
He disclosed that the IMF mission also assured government that it was ready to provide substantial additional balance of payments support under the PRGF arrangement.
The Central bank Governor also observed that there were positive signs for the stability and improvement of the Zambian economy even in the midst of the global financial crisis.
He noted that the copper prices, which as at yesterday had reached slightly over US$4,000 per metric tonne of copper on the international metal market, would help cushion the Zambian economy.
He has since called for the creation of more initiatives such as encouraging exports of raw materials.
The global financial crisis originated in the United States of America through sub-prime mortgage market, which resulted into the global economic recession.