BoZ Governor Warns Against Expecting Quick Fix for Zambia’s Economic Woes

BoZ Governor Warns Against Expecting Quick Fix for Zambia’s Economic Woes

Bank of Zambia (BoZ) Governor, Dr. Denny Kalyalya, has urged Zambians to temper expectations for a rapid turnaround in the country’s economic fortunes, warning that the complex, debt-constrained challenges facing the nation cannot be solved by a single policy intervention. Speaking during the announcement of the central bank’s decision to maintain the Monetary Policy Rate (MPR) at 14.5 percent, Kalyalya said Zambia’s recovery requires a multi-pronged, sustained approach anchored on fiscal discipline, economic diversification, and strengthened public-private partnerships.

The governor explained that while certain macroeconomic indicators have shown signs of improvement in recent months, inflation remains stubbornly high at over 13 percent, continuing to erode household purchasing power. High inflation, he noted, disproportionately impacts low and middle-income families, reducing their ability to afford essential goods and services. This inflationary pressure, combined with Zambia’s heavy external debt burden, means that the country’s economic policy space is limited and must be managed prudently.

Dr. Kalyalya identified several risks that continue to complicate Zambia’s recovery path. Chief among them are fluctuating copper prices, which affect foreign exchange earnings and budget stability, and volatile global crude oil prices, which influence fuel costs and, in turn, the cost of living. He also pointed to broader external uncertainties, including geopolitical tensions, global economic slowdowns, and unpredictable climate-related disruptions, all of which can have a direct bearing on Zambia’s trade performance and fiscal health.

Against this backdrop, Kalyalya stressed that the BoZ is prioritising inflation control over short-term growth stimulation. “We must first reduce inflation sustainably before taking on more aggressive measures to spur growth,” he said, emphasising that high inflation undermines investment confidence and long-term stability.

The governor underscored the urgent need to diversify the economy beyond its traditional reliance on copper exports, a vulnerability that has historically exposed Zambia to boom-and-bust cycles tied to commodity price swings. He called for targeted investments in agriculture, manufacturing, renewable energy, and services, noting that these sectors hold potential to broaden the revenue base and create jobs.

Kalyalya also stressed the importance of infrastructure development as a driver of competitiveness. Upgrading transport networks, energy supply, and digital connectivity, he said, will not only support industrialisation but also attract both domestic and foreign investment. However, he cautioned that these investments must be undertaken in a fiscally responsible manner to avoid further debt accumulation.

The decision to hold the policy rate steady at 14.5 percent reflects the BoZ’s cautious balancing act, keeping borrowing costs high enough to curb inflation, while avoiding measures that could stifle already fragile economic activity. This stance signals a recognition that quick-fix solutions, such as aggressive monetary easing or rapid spending increases, could reignite inflation and undermine stability.

Economists have generally welcomed the governor’s steady-handed approach, describing it as pragmatic given Zambia’s fiscal constraints and vulnerability to external shocks. While acknowledging that the policy stance offers little immediate relief to struggling households, they argue that the priority must be to stabilise the economy and restore investor confidence as a foundation for long-term resilience.

Kalyalya’s remarks come at a politically sensitive time, as the government continues to navigate the implementation of debt restructuring agreements and economic reform programmes. The central bank’s message aligns closely with the need for policy continuity and credibility, both of which are essential for sustaining donor confidence and private-sector investment.

However, the slow pace of tangible economic relief poses political challenges. With general elections on the horizon in 2026, the government faces pressure to deliver visible improvements in living standards. Balancing these political demands with the realities of macroeconomic management will require careful coordination between fiscal authorities and the central bank.