Following the press statement issued by the President’s Press Secretary, Isaac Chipampe, announcing the summary dismissal of Bank of Zambia Governor, Dr. Denny Kalyalya and the subsequent replacement by Mr Christopher Mvunga, we as the Civil Society Organisations wish to highlight the actual and potential economic implications such ad hoc change may set in motion given the nature of the prevailing economic conditions but also to provide sound advice on relief measures.
The Central Bank of any country is a crucial institution charged with the primary responsibility of promoting macroeconomic stability, partly as a signal of stability to global investors and financiers, and also as a vital ingredient in the economic growth equation. Thus, any changes in administration and operation of the Central Bank has the potential to send far-reaching ripples across and beyond an economy, signalling either a radical shift in economic management or strengthening of efforts on current trajectory.
Therefore, when the top-most boss of the Central Bank, the Governor, is summarily removed, there are serious concerns that are normally raised, which include: loss of confidence in the economic management of the economy resulting in low levels of investment and scepticism from international financial institutions concerning the integrity and autonomy of the monetary authority; short-term impact on financial markets including the foreign exchange market, often leading to volatility in the exchange rate and interest rates matched with rising general prices.
In view of these fears, the CSO community anticipates a negative response from the financial markets given the uncertainties associated with the decision. The exchange rate, which by 14:25 PM, Monday 24th August, had already depreciated by 0.7% to a record low of K19.20 per US dollar, is expected to continue to plunge, raising the costs of crucial imports and subsequently placing further upward pressure on already rising prices, in addition to raising foreign-currency-denominated liabilities such as debt repayment obligations. As of Monday 24th August, the yield on the nation’s $1 billion Eurobond due in 2024 had already edged up by 190 basis points to 30.34%, the biggest jump since April. Zambia’s current high debt levels have already substantially compromised Government’s ability to respond to the COVID-19 pandemic and the reduced social spending has adversely affected the poor and vulnerable in the society.
Furthermore, resulting from anticipated loss of confidence in economic management, a reduction in foreign exchange in-flows may be imminent which in turn might impact adversely upon the stock of national reserves. In reality, such a turn of events is likely to compromise Zambia’s chances of accessing the eagerly awaited bail-out package from the International Monetary Fund (IMF).
Given the prevailing economic conditions exacerbated both by increasing debt repayments and the COVID-19 crisis, from the monetary side, the Bank of Zambia has already set in motion a series of credible measures such as provision of the K10 billion stimulus package as well as reduction of the monetary policy rate. Hence it is our hope that the fiscal side complements these efforts by putting in place measures aimed at fiscal consolidation in order to restore macroeconomic stability. Specifically, we would like to encourage the incoming Governor to insulate the stimulus package from being used for political expediency as this may deeply undermine the intended purpose of the facility and potentially plunge the economy into a deeper economic crisis.
Indeed, given the grim nature of economic forecasts, expecting a contraction of over 4% in GDP, it is our strong recommendation that the incoming Governor avoids a radical shift in terms of overall policy direction as this has the potential to exacerbate the effects of the implications highlighted above. In noting that the outgoing Governor was consistent in calling for fiscal discipline and other fiscal strategies seeking to reduce the fiscal deficits, we implore the incoming Governor to speak the same language, placing a premium on macroeconomic stability as this will send the right signals to the international community.
CSOs would like to urge Government to resist the temptation of printing money in its endeavour to meet increasing budget deficits, a move of this kind would increase inflation in the short term and hurt the economy in the long run.
Joint Statement by:
Action Aid Zambia
Centre for Trade Police and Development
Consumer and Unity Trust Society
Zambia Council for Social Development
Transparency International Zambia
Oxfam Zambia
Alliance for Community Action-ACA
Pamela Chisanga- Development Activist
Civil Society for Poverty Reduction- CSPR
Caritas Zambia
Who can take CSO seriously after the revelations of bishop mambo and his subsequent resignation due to being a upnd supporter whilst acting as head of Cisco. Voestek!!! If I hear ati piiiiim
Buuuuuy buuuuy kalyaaaa lyaaaa
DON’T MISTAKE RUNNING AN ECONOMY TO RUNNING A TAVERN, WHERE DECISIONS ARE MADE UNDER THE INFLUENCE OF POMBE WAKUTALA.
Students of Economics today are privileged to have good case studies on how not to do things in modern Economics … Kikikiki
We hope our economies will be better in future with all these basket case studies!
Denny Kalyalya looks and behaves more presidential than Ba Edgar.
MMD fuel K7 a liter PF K17
MMD Exchange rate K7 to a dollar PF K19.20
MMD GDP growth 7% PF negative something
MMD mealie meal K30 a bag PF K150
MMD reserves 1 year import cover PF 2 months cover
MMD stability in the mines PF total chaos
MMD bumper harvest translating into reduced prices PF bumper harvest translating into nothing
MMD no bore hole tax PF very much there
MMD no toll gates PF Ndola chingola road toll gate one costing 4.3 million US dollars
Evidently we are worse off, no contest here, So why did we change government in 2011?
Br kz bena even serious issues to him its Upnd. Grow up man dont politicize everything.
What is this bookkeeper Mvunga going to do? The economy is in free fall. Look at the record of another drunk bookkeeper called aunt dizzy mwanakatwe. You cannot polish a turd!
Ba nostra fimofimo. Kalyalya may even look like the pope or whoever the fact is Lungu appointed Kalyalya and Lungu has disappointed Kalyalya. When you are appointed the next is dismissal. That office has seen many faces. They come and go but our lives continue. Zambia is alive and going about business.
I did agree with narrative that Kalyalya was Upnd guy. But the way Upnd has reacted, starting with HH, it all points to the fact that Kalyalya was part of the ploy to cause the economy to suffer. Since when did Upnd want to see a vibrant and sound economy run by pf. Kalyalya has done his part and he must or is moving on. Thanks and next topic
This K10bn stimulus package, they say Kalyalya slowed down its disbursement and only released K1bn. Is it true that the money is actually there? Where would it come from if we are so heavily indebted as a country? Or is it what he was supposed to print but refused?
In my small study of Fiscal policy and monetary policy and how you rate of Governors performance against his pears i find the the Cato Institute’s “Fiscal Policy Report Card on America’s Governors as an objective way to measure performance in policy and transmission mechanisms effecting desired economics results You flag this Cato Institute’s “Fiscal Policy Report Card on America’s Governors in view of Zambia’s Governors and Ministers of Finance and see how they have performed especially in the central bankers rates and other monetary decisions In the Cato Institute’s “Fiscal Policy Report Card on America’s Governors,” Cato scholar Chris Edwards examined fiscal policies of 43 U.S. governors, identifying only five who excelled in fiscally conservative policies
So far I do not see any shocks in the economy with the dismissal of Governor Kalyalya – he had already brought the Kwacha to K19/$1. I expected the Kwacha to lose value so much if the dismissal was a big deal. The departure of Ambassador Foote had more impact on the economy than the Central Bank Governor’s departure.
This is good advice by CSO. Unfortunately this advice will fall on deaf ears becoz ECL has already revealed that Revenue Receipts by the Treasury has sharply declined and therefore the New Governor of BOZ’s mandate is to Print Money given that borrowing capacity is now limited. The New Governor is likely to rundown forex Reserves financing 2021 Election expenditures. The outlook for Zambia’s macroeconomic stability under this Politicaly appointed Governor looks bleak.
See Government bonds as an indicator of performance short term vs long-term duration s also Your appointment should work hard to sustain and retrace to remove any fiscal cliff He performed amidst challenges but we expected more so is from the new
Kalyalya is the worst governor in the world.He was appointed when kwacha was 6.5 and he leaves the office when kwacha is 19.Only UPND who wanted to destroy the economy thru this man are dissapointed.Please ba Lungu never put such people in govt especially in key positions wjo belong to UPND.
Kalyalya is the worst governor in the world.He was appointed when kwacha was 6.5 and he leaves the office when kwacha is 19.Only UPND who wanted to destroy the economy thru this man are dissapointed.Please ba Lungu never put such people in govt especially in key positions wjo belong to UPND.
Hey Gayzar Zulu, thanks to Edgar China Lungu replacing the governor the kwacha has lost 15%…! Thank you so much for ruining the economy!