Bank of Zambia Governor Dr Denny Kalyalya says Zambia’s economy is projected to contract by 2.6 percent in 2020 from a projected 1.9 percent in 2019.
Dr Kalyalya said at a media briefing that this is the first contraction in real Gross Domestic Product in more than 20 years.
He said with the COVID-19 pandemic, the already challenged domestic macroeconomic environment has worsened adding that the significant reduction in consumer and investment spending due to the disruptions in business operations is expected to weigh on economic activity.
Dr Kalyalya said so far, the sectors known to be most adversely affected are construction, wholesale and trade, tourism, manufacturing, electricity as well as mining.
Meanwhile, Dr Kalyalya said the Central Bank has revised downwards the Monetary Policy rate by 255 points to 9.2 percent from 11.5 percent.
He said this is to mitigate the adverse impact of the COVID-19 on financial sector’s stability, economic activity and ultimately on people’s livelihoods.
Dr Kalyalya has explained that the cut also complements the other broader set of measures already announced by the Central Bank to mitigate the impact of COVID-19.
He said that although the path for inflation is higher than the February 2020 forecast, it is expected to trend towards the upper bound of the 6 to 8 percent medium-term target range at the end of the forecast horizon.
And on the depreciation of the local currency, Dr Kalyalya said the Kwacha, which had exhibited relative stability over the first two months of the year following significant tightening of monetary policy in November and December 2019, came under intense pressure in March.
He said this reflected the unresolved macroeconomic challenges associated with high debt service and debt levels, rising fiscal deficits as well as declining international reserves.
Dr Kalyalya said market attention to these was heightened by the publication of sovereign credit downgrade at this time.
He said the COVID-19 outbreak has since compounded these exchange rate pressures.
Dr Kalyalya said during the period, the Kwacha depreciated by 9.6% against the US dollar to a quarterly average of Kl5.18/US dollar.
He said with the mounting pressure in March, the Kwacha ended the quarter with a year-to-date rate of depreciation of 28.9% to K 18.1 1/US dollar.
Dr Kalyalya said to moderate exchange rate pressures, the Bank of Zambia provided support to the market and in addition, the Bank revised rules governing the operations of the interbank foreign exchange market to support its smooth functioning, strengthen market discipline, and provide a mechanism for addressing heightened volatility in the exchange rate in periods of stress.
We were always told that our debt was sustainable by our political leaders until they led us into this ditch. Now they are quiet and want the technocrats like BOZ to do more talking and clean up the mess
Covid 19 has found Zambia’s economy has already a weak immune system and underlying health condition
Do you realize Lungu’s entire term in office the economy has been on a slow downward march? This 2.6 percent contraction will cement his dubious legacy.
The 2.6% contraction is actually on the conservative side.
BOZ governor is Economical with the truth, the contraction projected may be is far over 2.6% but always to please the ignorant president Edgar Lungu.
He can’t say the truth, if he did, he could have been fired by now. Expect the so called contraction to be worse than what they are falsely claiming.
Whn did government arrears to local suppliers and grants to local authorities begin?
Fact is if there was no economic growth before Covid-19, there can’t be economic growth after Covid-19.
However, in every setback there is an opportunity for a comeback. We can reorganize ourselves by exploring new methods to boost our economy and thereby reduce our dependency on borrowing. Motto: away from debts to meaningful investment in local industries.
@4 Dokowe,
I fully agree with you, the projected contraction of 2,6% is very very very consevative, I would imagine the contraction is going to be in excess of 20%. This is simply because if according to Bwalya Ng’andu, from the Treasury, there is a government financing gap of at least 20 billion Kwacha ($1.09 billion) to 29 billion Kwacha projected for 2020, accounting for a whooping 40% of planned revenue, just how then could the GDP contract by a mere 2.6% during the same period? I doubt even the legendary magician Hocus Pocus can conjure such amazing magic. Someone is clearly lying because they do not know what they are doing & I bet it’s Ng’andu. They can fool fools like Nkandu Lunyo, Kainyokolola Zulu and Chagwa himself but not seasoned econonists like me. This economy is fu…
…. fu.cked real big time, things will fall apart this time..
Nine Chale – ever gullible and docile
@Nine Chale,
What setback when the economy has been contracting for last 5 years? Are you just drinking beer in Germany and avoiding to think?
Is that statement correct ba lipota Bama xam leaks?
Bank of Zambia Governor Dr Denny Kalyalya says Zambia’s economy is projected to contract by 2.6 percent in 2020 from a projected 1.9 percent in 2019.
Isn’t it ‘from a projected 1.9 percent growth?’
Anybody who has even just a basic understanding of economics will find what the Governor is saying in contrast to what the Treasury Minister Ng’andu said last week very contradictory & confusing. One of them must be peddling in lies. My point is if there is a projected govt financing gap of at least 20 billion Kwacha ($1.09 billion) to 29 billion Kwacha projected for 2020, accounting for a whopping 40% of planned revenue, It’s impossible for this economy to contract by a mere projected 2.6 percent during the same period. Just a basic appreciation of the correlation between GDP growth & its four components of personal consumption, business investment, govt spending, & net exports will tell you either Denny or Bwalya is fuc.king lying.
Surely would anyone blame some of us when we refer to PF supporters as !imbeciles ayi? Economy has been shrinking since they took over and like deranged monkeys they celebrate. Tebusushi ubo?
The economy was already brought in dead before covid-19 hit. Covid-19 just came to accelerate the decomposition of whatever is left.
Nine Chale: Tomorrow’s growth will come from today’s sacrifices and investment. Wht investment are we going to make considering that we’ve been sacrificing for a long time already? We hv no capacity to build up more debt because not even the Chinese are willing to bankroll our profligacy.
When you hear Kainyokolola Zulu boasting about how well the Zambian economy is doing, do not be troubled because his nearest comparable to an economy, being a Kumawanese, is Malawi, where there is clearly none!
policymakers have cited the growing national debt in calling for pausing efforts to relieve the health, humanitarian, and economic crises stemming from COVID-19. it would be unwise and self-defeating to let debt concerns deter policymakers from taking needed steps to fight hardship and to bolster and then revive the economyWhen reserves were scarce, the Federal Reserve could
influence the FFR with small changes in the supply of
reserves by conducting open market operations that
would shift the supply curve to the right (increasing
reserves) or left (decreasing reserves). In the past few
years, the Federal Reserve has adopted a new strategy
for implementing monetary policy. With ample reserves in
the banking system, the Fed now sets a target range for
the FFR and uses the rates on…
the rates on IOER and the ON RRP facility
to keep the FFR rate in the FOMC’s target rangeBefore the Financial Crisis of 2007-2009, almost all central banks in the developed world implemented monetary policy mainly by buying and selling short-term bonds to influence short-term interest rates or “policy rates
Reporters and Fed watchers in the U.S. usually think about monetary policy in a domestic framework. But because business conditions, including commodity prices, are correlated internationally, central banks tend to move their policy rates up and down together and their inflation and interest rates tend to be correlated
Comovements in monetary policy