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Alba Iulia
Tuesday, August 4, 2020

IMF slams BoZ for “incoherent” monetary policy

Headlines IMF slams BoZ for “incoherent” monetary policy

The International Monetary Fund has sharply criticized the Bank of Zambia for implementing what the global lender calls an incoherent monetary policy.

In a Country Report on Zambia published this week, the IMF team led by Outgoing Mission team for Zambia Tsidi Tsikata, the Washington based institution says the manner in which the Bank of Zambia has responded to has implemented its monetary policy has threatened financial stability.

The IMF states that the Monetary Policy Rate which is set by the Bank of Zambia has lost its aspiring role in the country’s Monetary Policy Framework.

In April 2012, the Central Bank took the first step towards modernizing its Monetary Policy Framework when it changed its operational procedures.

It formally shifted its operational procedures from targeting monetary aggregates or quantities to interest rates when it introduced the Policy Rate and established an informal interest rate corridor, set at ± 2 percentage points around the Policy Rate.

Following that decision, the operational target of Monetary Policy changed from reserve money to the overnight interbank rate.

Initially, Monetary Policy aimed at maintaining the 30-day moving average of overnight interbank rate close to the Monetary Policy Rate and within the corridor, but soon afterwards the moving average was reduced to 5 days.

Currently, the BoZ aims at maintaining the 5-day weighted average overnight interbank rate within the policy corridor.

But the IMF says the implementation of the monetary policy faced several challenges, which have hindered the modernization of the Monetary Policy Framework.

“The main underlying rationale for introducing the MPR was to mitigate the cost of credit. Although the introduction of the Monetary Policy Rate in Zambia was in line with similar measures taken by other African Central Banks modernizing their Monetary Policy Frameworks, the decision was taken within a context of the BoZ trying to exert greater control over lending rates,” the paper acknowledged.

“Indeed, less than one year later the BoZ introduced a ceiling on commercial banks’ lending rates,” it says.

The IMF stated that the ceiling did not produce the expected results and was removed in November 2015, along with several other Monetary Policy measures taken by the BoZ in an attempt to stabilize the kwacha during a sharp depreciation episode.

“In the first two years following the introduction of the Monetary Policy Rate, the BoZ kept the overnight interbank rate within the (wide) policy corridor 95 percent of the time. When the overnight interbank rate went outside the corridor, deviations from both bounds were relatively small and short-lived. The Monetary Policy Rate has lost its aspiring role in Zambia’s Monetary Policy Framework,” it charges.

It adds, “In an interest-rate framework, the Monetary Policy Framework plays a central role by clearly signaling the Monetary Policy stance. It also conveys, in a forward-looking framework, the CB’s assessment on future economic developments. In addition, by being much less volatile than under a MTF, it enhances policy signals, increasing the efficiency of the MP.”

The IMF says the frequent discrepancies between the Monetary Policy Rate and the Over Interbank Rate blurs policy signals making Monetary Policy opaque, harms the transmission mechanism of Monetary Policy and undercuts the credibility of the new operational framework.

“In addition, although under these circumstances interbank rates reflect better monetary conditions, they cannot perform properly the role of a meaningful reference rate, as they become very volatile and unpredictable. MP in Zambia appears to be trying to achieve multiple and often conflicting objectives,” it says.

The IMF also charges that one key reason behind the “policy rate smoothness problem” seems to be that the BoZ appears to face constraints on its ability to adjust its PR.
It says there is evidence that the difficulties faced by BoZ to adjust fully the Monetary Policy Rate reflect public and political concerns over the cost of credit and, therefore, growth.

“While the monetary authority sets the MPR, market conditions determine the interbank rate, which “transfers” to commercial banks the ownership of high interest rates. This kind of constraint is not unique to Zambia and is common in many other countries, and evinces the importance of operational independence. The lack of a coherent MPF not only causes unintended consequences, but also some of them are precisely what the CB is trying to avoid in the first place.”

It notes, “Despite the success so far in stabilizing the ER and inflation, the policy response created several distortions and unintended consequences, with large economic costs that could have been largely mitigated.”

“Some of them are, Credit growth has collapsed and lending rates have soared. Liquidity risks, funding costs and lending rates soared following the liquidity crunch created by November’s 2015 MP reaction. Consequently, credit growth plunged, as it has been restricted to prime clients, conflicting with BoZ’s objective of containing borrowing costs and increasing the supply of credit, harming financial inclusion and development.
It says the Monetary Policy response has threatened financial stability.


  1. Indeed, yes Indeed. The Rule of Thumb is that if IMF is slamming you and you are not on their bail out plan, then you are doing jolly good. I’m yet to find a country that prospered and developed under IMF programs.

    As loong as we stay away from IMF and World bank programs, am happy. If MMD had listened to IMF/World bank, Zambian would have been importing Maize for the last 10 years or so.

    • This man was quiet all along and now that he has been chased it’s when he is making noise. Why is IMF only bullying African states?

    • Actually, the incoherence facilitates and provides a very fertile environment for stealing, which is the one policy we in PF are very consistent and coherent on.


    • Why can’t economists (or is it just the IMF) make their points in a few sensible words rather than employ jargon that even they fail to comprehend well?

      I stopped listening to lawyers (liars) a long time ago because of this same poor attitude towards good communication practice …

    • BoZ has stopped stopped Kwacha to fill negative Balance of Payments. The result is like my commerce teacher put it: “Plenty goods chasing little money”, resulting in a fake strong Kwacha which no one can possess coupled with high lending rates & a collapsed economy.

      Thats what happens when you put styopet thieving clowns into State House.

  2. IMF are jokes

    Don’t pay much attention to them.

    Boz has done a world class job and under president Lungu the kwacha is stronger than a pula and rand.

    These stats shouldn’t be ignored.

    Imf should refrain from working with UPND and passing these carrass nonsensical statements.

    I hold a PhD



    • Mrs. Mushota,

      In what field do you hold this PHD?

      Smh, people and their pride.

      Your comments yesterday were how bad Zambia was when you visited.. how can you hold such strong double standards?

      Not only that, but how do you manage to include UPND into all negative things said about Zambia?

      Doesn’t it click after a while that these things are actually happening?

      Kwatcha is 10 to a USD today.. and consistently rising again as is poverty and corruption.

      You are a waste of this websites server time.

      Smh again.

  3. We told you so didn’t we? Amnesty Int’l last week and now the IMF slamming this visionless govt no wonder economic growth has stagnated at 3.5%

  4. Here we go again. The bullies at it again, what are they smelling this time around? High copper prices? Imperialists reinventing themselves and looking for legitimate reasons to recolonize Africa.

    • They wont have it easy this time around because they are competing against reasoning minds. They will soon run out of arguments expecting the whole country to fall in line with their despicable plans in unquestioning obedience.

    • The only ones colonizing Africa are the Chinese. THe Govt. is begging for money from the IMF as they have looted everything !

    • Only gullible and fibble minds would sacrifice their freedom just to get to state house. IMF is not your friend whether you’re HH or Lungu. Get that in your thick kabongo.

    • @Ndobo exactly, calling them stupid but on the other hand the entire country is actually on pause waiting for IMF to release some money so as to boost us up… it don’t make sense

  5. IMF dead wrong.BOZ has down an excellent job stabilizing market in past two years under difficult conditions of a financially indisciplined gvt.The kwacha stabilized and inflation down to 6.3%. Problem in Zambian economy is govt’s excessive borrowing and foreign banks corporate greed by not reacting meanifully to reduxtion in MPR through interest rate reductions.The banks need public and political pressure.Excessive gvt domestic debt is also causing interest rates to be high.Zambia’s problem is not monetary policy but fiscal.policy IMF.You have misdiagonised disease guys and put your credibility on the line.

  6. This what we call voice of reasoning

    Thats what we want to hear from oppostion

    NGOS and IMF has realised they is no intelligent opposition thats why of late the have started talkin

    mean while u5 is busy writing letters abroad how they gasses from his banker like a rat.

    and shunnin independence day. is that opposition honestly.

    honestly when you hire xaviour chishimba to be your mouth piece on prime tv. Xavior is deranged and he is just milking gbm the sponser

  7. I think the key issue here is that the BoZ monitory policy is increasingly being influenced by politicians who absolutely have no understanding of economics. Mutati is clueless to lead the key economic ministry and its becoming blatantly clear that he is leading PF into a ditch. Zambia may not need the IMF but the fact that 1 year after the 2016 elections, Zambian still has no economic programme is dangerous and a huge negative for the Minister of Finance who has religiously been singing the IMF bailout package. Now as things stand, IMF is punching holes left right centre in Mutati’s economic plans, where does Zambia now go to. President Lungu please fire Mutati ni chimbwi no plan.

  8. They smoked him like a rat. thats why he is gettin thse accolades.

    he is sendin videos of police raid but not telling he burnt and practiced ethnic cleansing in namwala.

    thats why we call him u5 even catholic bishops are shocked. his own churched never pressed for his release because they know him.


    • All you can talk about is HH, it seems he scares you that much that he’s always on your mind.

      Come the day of reckoning, he will forgive you.

    • #Laughing Matter – YOU ARE THE LAUGHING STOCK! You only believe in what you read in the government printed newspapers – OPEN YOUR EYES AND SEE WHAT IS HAPPENING !

    • Well said,
      I wrote to him before the last elections (vis Dr Mwanawasa), volunteering my experience in the natural resources area, to help formulate a coherent and pragmatic strategy for maximising the benefits for Zambia from those resources. In his true and inimitable arrogant manner, he dismissed my efforts!

    • But you’re responding like a misguided cannon, for lack of a better term. The topic is about BOZ and IMF, am I right? Jealous will drown you when there is no river

    • If you have no clue about economics and banking terminology, then just go and hang yourself, don’t attack an innocent man who is not even in your class, HH tries but what about you, what have done in your life?

  9. This is about Zambia iwee kolwe. The IMF has raised very important issues which this government must listen to, but some f00ls only think about winning elections. What has UPND or HH got to do with what IMF is telling the government. HH and Lungu will go Zambia will remain with future generations to come. The debt which this Lungu government has irresponsibly contracted won’t just affect UPND but everyone who lives in this country. Grow up and learn to look at the bigger picture iwee kolwe.

  10. Lord Jesus please continue to keep away this monster from ever influencing our economic path.
    We surely don’t need the IMF. We thank God for this intervention no bailout talks with the IMF will succeed and we are happy with that.

    • You surely need IMF with the reckless borrowing and gross fiscal indiscipline. Wait until the Eurobonds are due.

  11. It says there is evidence that the difficulties faced by BoZ to adjust fully the Monetary Policy Rate reflect public and political concerns over the cost of credit and, therefore, growth. It seems BoZ is trying very hard not to hurt anyone, neither the public nor the politician. The end result is that the commercial banks keep reaping us off with high lending rates only afforded by GRZ and therefore GRZ clouds the rest of out of the market. The cost of borrowing remains very high.

  12. The key word here being “distortions”. This is the same thing happening with the maize price there are forces at play trying to siphon huge sums of money be it buying maize at low prices then exporting abroad at triple the amount they bought it at, whether its banks and BOZ conniving to disadvantage both businesses and retail clients with their distorted interest rate which remain the highest in the region or the purchase of these fire tenders I believe we headed down a bad path!

  13. It seems in the last week or so, a lot more PF keyboard warriors have been hired..

    Tax payers money hey? What a great use.


  14. Judging from the jargon they have used, they don’t have anything to say. BoZ was very specific. One of the factors that contributed to the fall of the Kwacha was Banks hoarding the dollar. Suddenly most began to use the $20M credit window to meet their interbank obligations. BoZ moved in and closed that window and ordered them to meet their obligations overnight and HH’s friends stopped ukutumpa, except for Inter market bank. So where did the money suddenly come from? Didn’t Anglo abandon KCM when their candidate lost? All these are schemes to sabotage Zambia but ECL is smarter than they think

  15. Indeed BOZ has done well in the most difficult situation of fiscal indiscipline by GRZ. This fiscal indiscipline is the same reason you may need IMF to keep an eye on GRZ expenditure so that funds are spent on economical beneficial & viable projects and not on political appeasing projects – like building a road in a compound or a close in kabulonga with 6 houses! I resent the IMF but they maybe a better devil than our own GRZ who do not stick to set priorities. Take interest in finding out of the plans set out in the budget and what has not been done in a fiscal year and you will be shocked that over 50% of planned projects are never implemented year in year out.

  16. The only way Zambia would develop is through agriculture but the PF IS KILLING IT. The PF re also acting like London metal exchange in purchase of maize

  17. Colleagues, welcome to the real world of Economics. There are no two groups economists who will agree or interpret their theory the same way. The reason is simply that economics is not an exact science like finance where there are solid formulas, or even engineering. Not too long ago when the world oil prices collapsed, I read some articles where economists were debating what had caused that situation which they did not expect, and whether the prices would rebound. They could not agree! And they agreed to disagree as it was part of economics.
    So within IMF, you can rest assured the economists think differently Tshidi Tsikata will say something and another five economists will have a totally different view of the same subject.

  18. Somebody said which countriesvhave benefited from IMF BRAZIL. RUSSIA even GREECE us improving.
    IMF is not a bank it is part of World Bank Zambia is a member of IMF otherwise it could not ask for money
    This all comes under the umbrella of the United Nations that our president spent so much time at courting members .interest rate from IMF about 1.29% can anybody tell us what rate are we paying the chinese in interest.
    If you were lending zambia money wouldnt you set conditions. Remember we were firgivennour international debt once so our record is not good. Government got us where we are not The IMF

  19. What credible figures does the IMF have to condemn BOZ Monetary Policy? I see blind talk here. Let them produce the figures and the studies done to verify their criticism otherwise they a bunch of armchair critics.

  20. If IMF are stupid, stop going to them and stop ranting. Leave them alone. I’m waiting to hear contradiction reactions from Lungu and Mutati. Lungu will say let them pack their bags and Mutati will say we are discussing on the round table. kikikikiki

    • Zambia is a member of the IMF and pays its subscriptions for membership hence eligible to borrow it is not free money but you pay back…Okay????

  21. This latest IMF episode will ignite the debate on the need to reform the IMF and the World Bank so that they can fairly represent the interest of all nations, either big or small, around the world. What this latest furore, which is needless, has done is to bring, in very sharp relief, the nature of the relationship that exists between the IMF and the African nations in particular.
    To try and turn resentment of certain policies that a country or a leader has in the interest of his people, to turn that into an operating ethic, suggests the IMF is not a world body and that instead is a façade of arbitrary policies of stronger powers – and is unacceptable to Zambia, as it is indeed to many other progressive countries.
    BOZ should be criticised however for presiding over a banking system…

  22. BOZ should be criticised however for presiding over a banking system that promotes usury perpetuated by foreign banks which are have continued lending at over 30% when the rates of inflation are in single digit. If the IMF was talking about these unfair rates I would support them but there are unfairly attacking BOZ on non issues.

  23. Let us not depend on IMF. Here in Zambia we are blessed with our natural resources where we shud depend on. Again too much of borrowing is not good, you can fail to pay back.

  24. @24 agreed. In fact I rather feel that the IMF should have brought this concern ( if indeed it is genuine) right at the beginninf of the engagement. Otherwise it sounds like a ‘motive’ rather than a concern. So what is the motive, if it is under5 sorry we choose our leaders not IMF.

    • This is about Zambia iwee kolwe. The IMF has raised very important issues which this government must listen to, but some f00ls only think about winning elections. What has UPND or HH got to do with what IMF is telling the government. HH and Lungu will go Zambia will remain with future generations to come. The debt which this Lungu government has irresponsibly contracted won’t just affect UPND but everyone who lives in this country. Grow up and learn to look at the bigger picture iwee kolwe.

  25. The manipulative PF thugs have no clue on how to manage the economy.
    Only they are good at borrowing from China and blowing the money on themselves:
    We all know the IMF is stating the facts as they are.
    In other words the IMF is saying “ Zambia is in sh!t”

  26. Hazaluza Hagain and his thugs trying to bid off Zambia! No more privatization of Zambia and money to be pocketed by Hazaluza Hagain!

    • @Sharon! What is the level of your education. You can’t see any sense in the issues raised by this reputable organization (IMF). For you it is just about Lungu staying in power. That is the only thing that makes you happy. I pity this poor soul.

  27. Regardless of the party in power I wouldn’t advise going the IMF route. These guys can do an Italian job on a country worse still an african one. I’ve carefully ready this unbalanced article where only wrongs are pointed out but what about the positives. They want to create a perception of under performance there by justifying a bail out plan= modern day colonialism.abash imf

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