Tuesday, June 18, 2024

Bank of Zambia increases Monetary policy rate to curb run away inflation

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The Bank of Zambia (BOZ) has increased the monetary policy rate from 8 percent to 8.5 percent in order to strike a balance between economic growth and rising inflation.

BOZ Governor Christopher Mvunga said the rise in the policy rate by 50 basis points has been necessitated by the rising inflationary pressures.

Mr Mvunga explained that the rise in the monetary policy rate from 8 percent to 8.5 percent means that the cost of borrowing from lending institutions will gradually go up.

He made the remarks today during the monetary policy committee announcement and press briefing, held at the BOZ Headquarters in Lusaka.

“The Monetary Policy Committee took into account rising Inflationary pressures, with inflation projected to deviate further away from the target over the next eight quarters. This decision was taken while being mindful of the weak economic environment and fragilities in the financial sector,” he stressed.

The Bank of Zambia Governor was however, quick to say that the Central Bank has taken numerous steps to restore the macro-economic stability in the country.

He cited the maintaining of the policy rate at 8 percent last November, despite the imbalances in the economy as one of the approaches carried out.

Mr Mvunga underscored that the rising policy rate will not have any impact on already existing loans.

Meanwhile, the BOZ Governor pointed out that K4.1 billion has been disbursed to successful applicants from the K10 billion Stimulus package eye marked which was made available for disbursement to would be beneficiaries.

The main aim of the K10 billion stimulus package facility is to strengthen and enhance financial sector resilience, particularly in the wake of the outbreak of COVID-19 and its potentially devastating impact on the domestic economy

Bank of Zambia Governor Christopher Mvunga (middle) addresses the media and members of the public on the monetary policy adjustment upwards from eight percent (8%) to 8.5% due to escalation in inflationary pressures. Picture by SUNDAY BWALYA/ZANIS
Bank of Zambia Governor Christopher Mvunga (middle) addresses the media and members of the public on the monetary policy adjustment upwards from eight percent (8%) to 8.5% due to escalation in inflationary pressures. Picture by SUNDAY BWALYA/ZANIS
Members of the press and other dignitaries following the proceedings of the Monitory Policy adjustment upwards by BOZ Governor, Christopher Mvunga from 8% to 8.5% due to escalation in inflationary pressures. Picture by SUNDAY BWALYA/ZANIS
Members of the press and other dignitaries following the proceedings of the Monitory Policy adjustment upwards by BOZ Governor, Christopher Mvunga from 8% to 8.5% due to escalation in inflationary pressures. Picture by SUNDAY BWALYA/ZANIS

27 COMMENTS

  1. We see an issue, we fix it. Very proactive sensible approach by the independent BOZ. Meanwhile all hh can do is rejoice and politic over inflation. No solutions just hot smelly mabisi farts

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  2. To be realistic-this is not adding up-its a political mindset being advanced here-
    Just think-increasing the cost of borrowing-does it discourage inflation? It actually PROMOTES it./e.g.
    Property rental goes up in order to service the mortgage..So more money(inflation) is needed in the market.
    WHO IS FOOLING WHO

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  3. HH promises to trim down the number of bembas and easterners holding senior government positions once elected.
    In an apparent attempt to consolidate the wishes of his preferred region, Mr Hichilema said it was inappropriate for the two regions to hold senior Government positions at the expense of the his preferred regional block.
    He said this after declaring himself as UPND life President on Tuesday.

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  4. Money Supply has sharply risen which is a sign that Govt is printing money for Election Campaigns. Wherever PF is campaigning we are seeing “twusaka twandalama” and money being dished out to buy votes for the 2021 Elections. By August 12, 2021 hyperinflation will spike and cost of goods and services will sharply rise. With the Covid-19 Crisis and the Economy in a mess Zambia cannot afford to have a violent and disputed Election in 2021. A disputed 2021 Election will lead to an illegitimate Govt which inturn will lead to International Sanctions being imposed on Zambia. ECL and PF need to think thru what violent and rigged Elections might produce 4 Zambia . The writing is on the wall.

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  5. I have never understood what effect central bank interest rates have in Zambia. Zambians HARDLY borrow from banks because the majority are unbanked. We are not talking about a country where millions own mortgages and bank loans. The biggest borrowers from the banks in Zambia are the GOVERNMENT and then a few small firms. It is government borrowing to throw money in the streets through, tenderpreunerial projects, absurd ’empowerment funds’ and vote buying that distorts the money market.

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  6. @Mutale you sound so negative and politically inclined. Why only ECL and PF to guard against violence? I thought you should make that appeal to the Zambian youth who are the majority and most likely to engage in violence.

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  7. 1  Kaizar Zulu 
    February 17, 2021 At 2:28 pm

    “..We see an issue, we fix it. Very proactive sensible approach by the independent BOZ. …….”

    What have you fixed ??? Is increasing the price of borrowing for Zambians fixing the economic problems ???

    Hehehehehe ……..sometimes if you have no clue , just zip it…

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  8. The other day we had habazoka saying he had discussions with minister of finance found zambias economic problems are based on zambia importing everything ….

    Some times you wounder about these Zambian based economists ……

    I mean me as an engineer has known this for the past 8 years ……

    we have been telling PF to build a manufacturing base instead of half of those roads and hospitals….

    Only now they are finding out that zambia imports everything …….

    The boat has sunk , too many fat bellies weighting it down, commanded by drunk cader thugs lead by lungu…….

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  9. Bush economic indeed, increasing monetary policy has a detrimental effect on cash flow in the economy by narrowing the borrowing power of SEMs who are the bedrock of our economic growth. This Mvunga is a dull chap who has no vision of his own but the lost vision of his master. Ever since he was appointed to as bank governor nothing tangible has come out apart from seeing the kwacha depreciate further and inflation skyrocket to never head of levels. What a nincompoop.

  10. someone has asked a very serious question, WHAT IS THE IMPACT OF DONATIONS BY POLITICIANS ON OUR ECONOMY, HAS ANY ONE GOT STATIS ON THE EMPOWERMENTS THAT THESE POLITICIANS GIVE TO YOUTHS AND MARKETEERS ESPECIALLY DURING CAMPAIGNS?
    This country once boosted of zambains who would set up chilimba saving groups to save and later buy an asset they wouldn’t afford using their basic salary, but today under pf zambians have been reduced to forming chilimba to save and buy groceries. WAKE UP MY FELLOW ZAMBIANS FROM YOUR SLUMBER.

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  11. Chris just admit that you are fulfilling the reason why you were appointed- TO PRINT MONEY. And you have printed so much of it. We are seeingit in the hands of the politicians who have gone on rampage dishing out K100s . You should take accountability for ur actions. You are now punishing innocent citizens. We knew it from the beginninig. It is not an easy job for you. The shoes are too big for you. You are making the Kwacha USELESS!!!!

  12. Rising inflation, rapidly-depreciating currency, low output, run-away budget deficit, foreign debt crisis and high unemployment. Wht’s the correct monetary policy response without correct fiscal policy response?

  13. ULIBE NZELU MUTALE,,ALL YOU ARE THINKING IS ELECTIONS BEING RIGGED .GROW UP . ZAMBIA IS NOT FOR CONFUSED THINKERS LIKE YUORSELF. DURING BY -ELECTIONS YOUR RED PARTY WON SOME SEATS IN THEIR STRONG HOLDS AND BA GREEN LOST . YOU NEVWER SAID ELECTIONS WERE RIGGED. NEITHER DID BA GREEN SAY ELECTIONS WERE RIGGED. BUT EACH TIME YOU LOST A BY-ELECTION IN THE STRONG HOLD OF BA GREEN YOU CRIED ELECTIONS WERE RIGGED. ITS CKEAR YOU ARE DEAD SCARED OF LOSING TO BA GREEN AGAIN THAT IS WHY YOU THINK YOU CAN POISON THE MINDS OF ZAMBIANS TO BELIEVE YOUR LIES THAT 3021 LECTIONS WILL BE RIGGED… BOZA . MWALUZAKALE .SHUT UP

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  14. Timbwi out of 10 violence cases 8 are committed by PF Cadres. The markets were burnt by PF Cadres, the Gassing was carried by PF Cadres, Nsama Nsama and Joseph Kaunda were killed by PF Cadres inflifrated into the ZPS etc. To make matters worse the PF controlled ZPS has killed many people in cold blood. Historically PF Cadres have proved that they are violent in their activities. If we have a violent and disputed Election in 2021 u can rest be assured that PF Cadres will be the forefront of the violence. Stealing Elections and grabbing a Third Term illegally and unconstitutionally is some form of violence. The Panga Family relies on violence to steal Elections.

  15. This useless drunk, same with that other stup1d drunk who bankrupted a country… Run away inflation like run away bride…. Hahahaha dununa reverse

  16. Governor Mvunga:
    Have you ever considered Heterodox macroeconomic theories like Modern Monetary Theory(MMT) at Bank of Zambia?
    MMT says and/ or argues that monetarily sovereign countries like US,UK,Japan, Canada can spend,tax and borrow in fiay currency they fully control,and are not operationally constrained by revenues when it comes to federal/ government spending.Put simply ,such govts do not rely on taxes or borrowing for spending since they can print as much money as they need and are the Monopoly issuers of the currency.This explains the huge stimulus package in the US being pushed by President Biden.The question is,can we do the same? Are we in control of our Kwacha?How possible is it that the US can print money with no consequences of inflation?The core idea of MMT is that…

  17. It must read Fiat and not Fiat….

    Continuation:
    The core idea of MMT is that govts with a Fiat currency under their control can and should print as much money as they need because they cannot go broke or be insolvent unless a political decision is taken to do so.Printing of money in these advanced economies is known as quantitive easing(QE).

  18. BOZ addiction of the MPR needs to be cured. Zambia’s problems are fundamentally basic. Controlling the money supply won’t arrest inflation. We need to address production. Our production output is low that is why inflation is soaring. This unprecedented masssive infrastructure that the current government talks about doesn’t represent increased economic output for Zambia. These projects directly boost the economies of China and India from which the loans experts and equipment come from. It is not rocket science.

  19. @Sharp Shooter The economies you have quoted are have enormous economic output that counter the effects of printing money.Zambias economic output is low and printing money will invariably result in high inflation. The supply of money should be in equilibrium with the demand of money. The demand of money is underpinned by production of real goods and services. Get the balance wrong and you get inflation or deflation.

  20. BOZ the inflationary pressure is as a result of high debt levels resulting in pressure on the kwacha (deflationary) thus upward price pressure. Increasing the interest rate won’t fix this situation.

  21. @Chaos Theory PHD
    The challenge Zambia has is cost- push inflation coupled with low/ negative economic growth,a situation known as stagflation.Thus using monetary policy increasing interest rates will increase the cost of borrowing thus effectively reducing aggregate demand(AD) and subsequently reducing economic growth.Is this desirable to an economy like Zambia facing both rising inflation (employment) and falling output/ GDP? Zambia needs to work on fiscal policies as well as suppply- side economic policies that seek to increase productivity, competition and innovation-all of which can maintain or bring prices down.
    Secondly,Zambia has to work on imported inflation which is directly linked to US dollars,that is arguably printed on the premise of Modern Monetary Theory.Here not every…

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