BANK of Zambia (BoZ) governor Caleb Fundanga is optimistic that Zambia’s inflation rate will be reduced by four per cent or less to meet the 10 per cent inflation target set by Government in the 2009 national budget.
Speaking during a media briefing at the BoZ stand at the on-going Zambia Agricultural and Commercial Show, Dr Fundanga said it is possible for Zambia to achieve the 10 per cent annual inflation rate target in the remaining quarter of the year.
He said the reduction in food inflation due to the on-going crop marketing season including the reduction of mealie meal prices, will play a significant role in boosting the national economy.
Dr Fundanga said the high inflation rate was caused by the discontinuation of Government-subsidised maize by the Food Reserve Agency and pass-through effects of depreciation of the Kwacha against foreign currencies.
He said the BoZ hopes to see continued stability in the exchange rate and would continue to employ indirect instruments in monetary operations.
He said the 19.4 per cent rise in copper price to US$4,045. 66 per metric tonnes from US$3,389.42 per metric tonne, the doubling of sugar production by the Zambia Sugar Company and cement production by Lafarge Zambia, and the diversification of the economy would help the country pick up from its current economic woes.
He said it was too early to comment on whether or not Government will borrow from the public to meet its budgetary costs.
“There is still hope that some donors will honour their budgetary pledges before the end of August,” Dr Fundanga said.
Dr Fundanga also said China’s economic recovery will play a significant role in copper export revenue for Zambia because China is one of the major importers of copper.
He said, however, that relying on copper for more revenue would be risky because prices of the commodity are volatile.
Dr Fundanga observed that inflationary pressures are expected to emanate from high production costs due to current power shortages and the recently approved 35 per cent electricity tariffs and higher international crude oil prices.
The local currency is said to have been relatively stable against the US dollar and appreciated by one per cent compared with a depreciation of 9.3 per cent recorded in the first quarter of the year.
“The average inter-bank exchange rate of the Kwacha against the US dollar strengthened to K5, 281.64 against the US dollar as at the end of June from K5,337.18 against the US dollar as at end of March 2009.
Foreign players made net supplies of US$59.8 million in the previous quarter.
Dr Fundanga also said the volume of unpaid cheques declined by 11 per cent to 5,568 bank cheques and has urged the media to educate the public on the consequences of bouncing cheques.
He also said preliminary data shows that Zambia recorded an overall balance of payment surplus of US$24.9 million during the second quarter of 2009 with a deficit of US$147.7 million the previous quarter, due to narrowing of the current deficit to US$107.3 million from US$231.3 million.
He said copper export earnings have recorded about 19.4 per cent rise.
“Similarly, cobalt export earnings recorded a 39.2 per cent increase to US$18.0 million following an increase in the realised price to US$12.97 per pound from US$5.03 per pound,” he said
However, cobalt export volumes declined by 46 per cent to 628.51 tonnes.
He said that investment pledges totaled US$762.7 million compared with US$1.820.7 million during the same period in 2008.
Dr Fundanga also said the importation of vehicles declined by 25 per cent mainly because of the economic crisis the country is facing but acknowledged that the development is good for the economy.
These are the issues we should be debating not stupid impeachment process and journalists being beaten up by party thugs. What does all this data mean for the ordinary man or woman on the street?
How about employment rate iwe,
That is my point. Our politics should be about real issues. MMD should in no way condone violence carried out by its supporters. The opposition should be looking at these figures and questioning the govt as to how they will benefit ordinary Zambians. Seems to me that our politics are not about issues but personalities and insults. The fact that not many bloggers have bothered to comment on the above issues speaks volumes about our polical culture.
The title of this news report is grammatically wrong! 🙂 lol.. Nonetheless, I feel that despite the small shoots sprouting up in the world economy, things stil remain volatile.. It’s comparable to standing on a broken leg after a period of healing.. its not fully healed, but you do have a bit of mobility. Lets hope the consumer confidence continues to be on the rise, and people get out of their shells ; till then, we all must be cautious..
We should discuss journalists being beaten up by thugs because press freedom is a key element of our democracy. Democracy and economic prosperity are not mutually exclusive and we should strive for both. My concern with macro economic measures of economics such as GDP, Interest rate, Inflation rate, etc is that they do not always reflect the “human development” on the ground. Issues such as quality and access to healthcare, education, reduction of poverty, etc. But credit where it is due. We have to start somewhere and the objective of single digit inflation is as good a place to start, as long as it does not send interest rates through the roof.
The only thing that is certain and unchangeable is the fact that nothing is certain and unchangeable. We need to realise that volatility is to a large extent a way of life, and therefore we need to plan for it by practising good risk management. A few years ago, the rate of the dollar to kwacha fell dramitically (supposed to be a good thing!), and yet most businesses who had there revenues (credit and otherwise) denominated in US saw this as a bad thing and complained bitterly. Why? They assumed wrongly that kwacha would always be weak. This analogy can be used widely. Copper prices will drop again on day, we will have a drought again one day in the sub region, China will not always rely on our exports etc. To survive, we need to anticipate and plan ahead.
Good report. We should learn lessons from the issues mentioned. E.g we now know what caused high inflation. So we should plan for the next rainy season so we dont import maize. Similarly Govt should watch those maize subsidies. Their on & off is is destabilising.
How much will price increases in power and oil impact our overall inflation. These two are so perversive that prices of every thing else will increase. Hope this has been factored in the expected 10%
As other bloggers have said, it will be good to see how all these statistics improved the lives of ordinary Zambians.
Bank bosses get away with blue murder. Remember bank boses still got huge bonuses while the financial crisis and recessions crept in. They should live in the real world. Dont trust bankers.
This is such good news that there are hardly any comments by the hundreds of LT bloggers. It goes to show that people are not REALLY interested in Zambia’s prosperity but the government’s and RB in particular’s failure. I could imagine what would have been the response had the headline read ‘Inflation to reach 20% this year. If we are really fair, we should give credit where it is due. Well done RB!
The real issue should be how does low inflation will benefit small businesses and the majority Zambians? This reduction in inflation is cuased by high supply of agriculture products and nothing to do with the government policy. So credit should go to the farmers and not the goverment. This is just simple economics. I really don’t need a degree to figure this out.
#7, inflation due to power and fuel probably accounts for less than 15% (don’t have exact figures), while food inflation alone has a weight of 57%. When we had single digit inflation it was because we contained food inflation to levels of about 5 % or below, while non-food inflation remained in double digits. I am sure the policy makers know this already, and that 10% is not far-fetched. What does this mean for me as a consumer? Well, i do not have to worry about high fluctuations in the price of mealie meal and other food items, among other things
Looking at it from a different angle, the high cost of energy increases the already high cost of doing business in Zambia. You ever wondered why our GDP is so low (US$17 billion for 2008, CIA world fact book). Well you just have to look at the input-output ratios for most industries. The costs are so high that value added, which is the difference between output and the costs, is little. I am no economist, but the Governor’s report is actually good. I did not expect such numbers to come out during this period of world recession. For those of you with money, you need to put it in such emerging markets like Zambia.
the only way to bring down the cost of energy is for the g.r.z to get out of the “business” of running business, reduce their bureaucracy and the civil service, liberalize the energy industry and privatize zesco. yup, that’s right, privatize freaking zesco!! NO politician or bureaucrat will ever have the discipline and expertise to develop and deliver progressive energy services or products. only a real entrepreneur business person who lives or dies by the bottom-line can do that.
Its for years later now. We have a new government (PF) and Dr Fundanga is nolonger BOZ governer. The inflationary pressures have worsend. Production cost has incleased due to the inclease in electricity tariffs, higher international prices and the removel of subsides on fuel, inclease in the minimum wage, and a weaker Kwacha which has caused an inclease in the cost of imported inputs.
We know our problems but what is the solution to our problems and why are’nt we doing them?