The Bank of Zambia has raised the Monetary Policy rate to 9-percent from 8.5 to contain persistent inflationary pressures. BOZ Governor Denny Kalyalya said that the 50 basis point increase is also meant to steer inflation to single digits in 2022 and within the 6 to 8% target range by mid-2023.
Dr. Kalyalya said that the decision is also consistent with the central bank’s move towards the normalization of the monetary policy stance and has since called for effective implementation of fiscal reforms to complement the achievement of low and stable inflation.
Speaking during the quarterly briefing in Lusaka today, Dr. Kalyalya stated that the Monetary Policy Committee was also mindful of progress recorded by the economy which it doesn’t want to disturb and restoration of macro-economic stability which has been e
usive in the past.
He said the committee also considered various economic reforms announced by the new dawn government in next year’s national budget which would be able to get low and stable inflation if fiscal and monetary policies are well implemented.
And Dr. Kalyalya added that much as the global economy has made some recovery, it still remains vulnerable owing to uncertainties on the impact of Covid-19 as some countries have already taken some measures.
Dr. Kalyalya pointed at construction, wholesale and retail trade, education and ICT as major drivers of the economic growth with the latter being supported by Covid which saw many people work from home.
He further expressed concern on the low levels of Covid-19 vaccinations saying it is below 1 million against a 5 million adult population.
Meanwhile, the Governor said energy and agriculture sector reforms are cardinal to help address the current inflation problems because the current fuel prices and electricity tariffs have had adverse effects on the exchange rate.
He also expressed optimism that the sale of maize by the Food Reserve Agency and private players from the last bumper harvest is expected to help moderate increases in prices of food items like mealie meal.
On debt, Dr. Kalyalya said Kwacha denominated credit to the private sector grew by 35-point 9 percent in September year on year compared to 33-point 8-percent in June.
He added that foreign currency denominated credit to the private sector contracted further by 30.8-percent due to conversions to kwacha loans.
The Governor urged government to adhere to domestic financing plans which will contribute to reducing borrowing costs for the private sector and support economic growth.
He expressed hope that securing an IMF funded program will help minimize adverse effects of domestic financing on the credit market and management of external debt to sustainable levels.
Dr. Kalyalya also revealed that Gross international reserves rose to 2.9 billion dollars equivalent to 4.9 months of import cover at end of September from 1.4 billion dollars equivalent to 2.6 months of import cover at end of June.