Bank of Zambia Governor, Denny Kalyalya says the Central Bank is in the process of adopting a new system of controlling money supply otherwise known as monetary policy framework.
Monetary policy is the process by which the a central Bank of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Dr. Kalyalya says the new monetary policy framework will develop models that will help forecast the country’s inflation rate up to two years ahead.
He says there has been an increase in the interest rates which reflects the level of fiscal deficit following the decision by the Central Bank to tighten the monetary policy.
Dr. Kalyalya however stated that tightening the monetary policy has helped support macroeconomic stability though it has resulted in a reduction in credit and money supply growth.
He was speaking at a breakfasting meeting in Lusaka on Tuesday.
And Dr Kalyalya said the Bank of Zambia is aware of the displeasure exhibited by the stakeholders due to the upward adjustment in the statutory reserve ratio from 14 percent to 18 percent.
He said the move was meant to mop-up liquidity to a tune of nine hundred million Kwacha.
Meanwhile, Dr. Kalyalya disclosed that the growth of the economy might remain around six percent.
He said various factors have triggered a sharp deterioration in the exchange rate which has depreciated by around 15 percent over the first quarter of the year.
And Zambia Chamber of Commerce and Industry president Geoffrey Sakulanda has urged the Central Bank to highlight some of the policies that will be implemented to strike a balance between managing the exchange rate and the interest rates.
Mr. Sakulanda said monetary policy implementation has a direct impact on the operations of businesses.
He said it is important that various stakeholders have access to such information on what the bank is doing.
Mr. Sakulanda said due to government’s revision of the mining tax, there will be implications that will lead to budget deficit, which will likely to increase domestic borrowing.