Tuesday, May 28, 2024

BOZ Monetary Policy Meeting


The Bank of Zambia (BoZ) Monetary Policy Committee (MPC) commenced its meeting today with the expected announcement on the decision taken to be announced on Wednesday, 15 May 2024.
As the MPC deliberates, we urge them to seriously consider the following:


The BoZ has significantly increased the statutory reserve ratio to the extent that businesses are struggling to access affordable credit and, therefore, contractionary to an already struggling economy. This can be proven by the recent IMF downward revision of our GDP forecast for 2024 from 4.7% growth to 2.3%. If we assume our annual population growth is 2.5%, then the country is technically in recession with real GDP growth at -0.2%. Any further increase in the SRR will worsen the situation. If anything, the reverse should be considered.
We are of the view that inflation targeting is not the panacea to reducing inflation. Monetary policy measures alone can not bring down inflation. Whilst BoZ is trying hard on its part, the fiscus are doing the opposite. Therefore, increasing the monetary policy rate will hurt the economy even more. Either you maintain the rate where it is or, better still, reduce it.


Again, we are of the view that inflation targeting using the Monetary Policy Rate adjustment is the wrong tool given the structure of our economy. Imported inflation arising from deteriorating exchange rate will not be arrested by increasing the monetary policy rate as much as textbooks say so.
Our commercial bank lending rates are in the range of 25-28%, whilst the policy rate is almost half of that. So were is the correlation between the policy rate and commercial bank lending rate? If the rate is adjusted upwards, it just increases the spreads for commercial banks to make more money. Looking at most commercial banks’ financial statements, one can clearly see huge growth in net interest income, most of which is presumably coming from investments in government securities or commercial lending at high interest rates.


Recent reports indicate that K14 billion of Constituency Development Fund (CDF) balances in commercial banks was invested in government securities by the commercial banks thereby leading government to be borrowing its own money which sits on non interest bearing accounts in the commercial banks. Surely, this should constitute unethical conduct by the affected banks, and surely BoZ should act on such behaviour.
Furthermore, the job of banks is to provide credit to businesses and citizens and not the Armchair Banking we are seeing where commercial banks are more focused on mobilising customer deposits to invest in Treasury Bills. To resolve this, commercial banks’ participation in Treasury Bills should be capped so that they are forced to lend to customers.


What we need now is expansionary measures to grow the economy, which is shrinking. BoZ, during the COVID time, introduced a K10 billion Medium Term Refinancing Facility at discounted borrowing rates to support businesses and individuals. BoZ, given the drought situation, leading to load shedding and now water ‘shedding’ (rationing), should seriously consider introducing a similar facility. The impact of COVID as we see it is no different from the impact of drought.
We urge the MPC to seriously consider the suffering of Zambians due to dwindling economic activities and business closures. It is our view that BoZ is a professional institution that operates independently and, therefore, will arrive at independent decisions to support our ailing economy.

Fred M’membe
President of the Socialist Party


  1. Where you miss it is that more often than not, institutions like BoZ don’t make decisions that can correct whatever prevailing situation but those that seem to be politically correct in the eyes of the appointing authority. When committees like the MPC meet, it’s either to endorse what’s already been hinted from above or to make recommendations that least stand any chance to be adopted. If they insist that their views are correct, they get fired instantly after being accused of working against the government. In such a scenario you don’t expect reason to prevail.

  2. It is annoying that commercial banks only cover loans to people who can show a payslip and who gets their salary through the same bank. Why cant banks like ABSA offer loans to people who just run business or may have other sources of income such as rental income as collateral for loans. These commercial banks that want riskless money are not good in supporting business development and growth in Zambia. The regulator of commercial banks should look at the terms and conditions commercial banks offer as a precondition for loans. Only offering loans to employees where banks can deduct from their salaries wont support business development.

    • @Nhoma Yamaano your concerns are valid. The biggest challenge we face is that we lack a culture of responsibility, believe me many people will not pay back the loans. We have ourselves to blame.

    • This is what happens when government mops up all available funds in treasury bills and bonds. When government reduces its borrowing banks will come to you crawling with offers for credit. Nowadays government bonds are under subscribed because there’s no money, eventually banks get idle CDF and lend it to government

  3. The usual rubbish from the bush doctor Fred M’membe.
    For a man who is supposed to have a phd, his writings are very unintelligent. Mostly gossip and not facts.

  4. Concerned citizen, any serious bank can know how to secure the loans they give to business people. Collateral can be in the form of properties owned by the business person seeking a loan. Serious business people dont get a monthly pay slip which goes through a bank. All banks need to do is due diligence to deal with irresponsible people who dont want to pay back the loans they obtain.

  5. For once in a very long time, Mmembe has written a constructive piece. This is what is expected of the opposition. Kudos.


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