By Hakainde Hichilema President UPND
Despite the ratification of the Mr. Christopher Mvunga as Governor of the Bank of Zambia, the Kwacha continues to come under intense pressure. We cannot ignore lingering uncertainties about the extent of the central bank independence over the next 11 months, and the implications for inflation and the exchange rate.
As a close affiliate of the President and a member of the PF, Mr. Mvunga’s first task should be to clear the air as to whether the Bank of Zambia will operate independently, or join the class of public institutions that are severely compromised by the current PF administration. Specifically, will economic considerations be subservient to political interests, whenever his allegiances to Mr. Lungu do not align with the long-term interests of the Zambian people?
So far, the misplaced instructions from a PF cadre, to Mr. Mvunga to deal with perceived economic sabotage at Bank of Zambia, have left the public wondering if he will be his own man, or if he will be working under instructions from his fellow party affiliates. For the sake of the weakening economy, we strongly urge the Bank of Zambia to maintain its professionalism, restrain quasi-fiscal operations such as money printing, and provide objective analysis and advice to the government on the state of the economy.
In dispelling all doubt, it must be known that it will not be sufficient to have central bank independence in pronouncement only. Rather, it will be the actions of the Bank of Zambia that will speak louder than its words. For instance, will it aggressively use our merger foreign reserves in pursuits of a short-lived appreciation of the Kwacha to impress his party, or will it take a more cautious approach? The rapid depletion of our reserves could lead to a steep depreciation and/or imposition of foreign exchange controls of the 1980s, taking the country in reverse.
On the issue of money printing, it must be noted that the Bank of Zambia Act limits lending to Government in 2020 to approximately K7.4 billion, or 15 percent of 2019 revenues. Estimates place current lending at 9.0 percent. Considering the planned domestic financing of K17.4 billion in the 2021 budget, it is easy to imagine a rapid use of the remaining headroom.
A breach of this limit would be indicative of a weakening of the fiduciary responsibility under Mr. Mvunga’s regime and risk of additional upward pressure on inflation within the context of an already struggling economy. Zambia has a painful history of hyperinflation when there was excessive money printing in the 1980’s and early 1990’s, to which we should not go back. We strongly urge the Bank of Zambia to slow down its purchases of government bonds and restrict lending to Government within the limits prescribed by the law, so that we do not have excessive inflation.
Further, various political statements by the PF over the dismissal of the previous Governor, suggest that the Party has a strong interest in the K10 billion stimulus package. Again, it will be important to closely watch the actions of Mr. Mvunga on this matter. Will he loosen restrictions to provide the PF easy access to these funds? And if they do gain access, will they repay these loans? We all know that the poor repayment culture that plagues CEEC and DBZ has a lot to do with easy lending to interested parties. As things stand, the non-performing loans of the Banking Sector are very high at about 13 percent, and it will be important for any economic recovery that a stable financial sector remains.
In sum, Zambians should watch the actions of the new Governor and judge his performance by the outcomes on inflation, exchange rate, and financial stability. His predecessor left inflation at 15.5 percent, the dollar exchange rate at K18.5/$, and a stable banking system. Where Mr. Mvunga takes things from here will depend on his actions in these areas. We hope that for the sake of the Zambian people, Bank of Zambia will remain independent and carry out its operations in a manner that makes the cost of living more affordable for the majority of the population.
The BOZ is now in wrong hands. The new chap is clueless. Only good and blue label dancing.
The saying goes”you cannot judge a book by looking at it’s cover”. Let’s give Mr Mvunga time and chance to prove Himself, right or wrong for the job
The problem is not about Mr Mvunga but to do with his political connections to PF and to Lungu in particular.
He cannot only claim to be independent but must also be seen to be independent.
Above all Mr Mvunga has no demeanor or integrity to talk about. His playboy nature which is similar to Lungu’s dancing for nothing stints just show how he casualy takes his responsibilities for an important job like a Central Bank Governor.
Above all, this guy doesn’t qualify for the job but Lungu’s hand prevailed.
It’s a matter of when and whether the calamity will happen at BOZ
An article written by image builders
A whole president of an opposition party writing an article on lusaka times on a mere position of governor. I wonder if hh wanted to be the boz governor since he likes economics so much. I would advise HH to prove himself by applying for a lower role in boz e.g. economist and then working his way up like any other person.
Useless article the central bank governor of South Africa is a member of the ANC and close associate of President ramaposa what would you say about him? Don’t prejudge someone even before he gets the keys to his office
Kaizar, i doubt he wrote it for LT, but the advise in the article is solid, but obviously would not make sense to clinical lab assistants, thugs and terrorists! My advice to you KZ, and your fellow member of the pure fulls(pf), is to take heed! HH has on several times sounded warnings and we ignored them with dire consequences!!
Anyone can write this.
It is very clear, Chris has no future, either he will kill himself when exchange reaches $1/k25 by Christmas or he can wait for UPND to throw him away in dust bin.
Try 30 to one by New Years
HH as usual will be vindicated. Mvunga is a PF Cadre who cannot refuse orders from the Powers that be.We are in an Election Season and as such Chris Mvunga will be forced to deplete foreign exchange reserves and print and borrow Money recklessly. With such ill advised Monetary and Fiscal Policies inflation will spike, price of goods and services will skyrocket while the Kwacha will sharply lose value. The Economic outturn between now and August 2021 Elections look gloomy. Lets wait and see if Mr Mvunga will avert the arising Economic Crisis which will be exacerbated by the current Debt Crisis. Time will tell.
Don’t blame bank governors about the economy mess.you can
Keep changing every week but
Rate of dollar will not go down.
Government has to stop unnecessary experience and plan
Income generating projects.