THE Zambian economy has potential to bounce back to single digit inflation levels, Economics Association of Zambia (EAZ) Executive Director Alexander Chileshe has said.
Last week, the Central Statistical Office (CSO) announced that the annual inflation for the month of March shot up to double digits by 0.4 per cent to 10.2 per cent from the February 9.8 per cent.
The increase in inflation was attributed to increases in the prices of food products and public transport during the month under review.
But Mr Chileshe said in response to a Press query that Zambia had potential to get back to single digit inflation during the coming months.
“This has been demonstrated before in 2007, 2008 and 2009. What is most important though, is ensuring that we have stability in inflation levels because frequent fluctuations have significant impact on a number of things such as the value of our money and rates of borrowing among others.
“Stability in inflation will breed more confidence in the financial sector which is a good thing for all of us,” he said.
Mr Chileshe said Zambia had long known that the results of the agriculture season had an impact not only on inflation levels but also on poverty saying sustained investments in the agriculture sector well and efficiency in the sector coupled with sufficient incentives for private sector involvement was the answer to mitigate high inflation.
“Zambia has good whether all year round and can grow almost anything. It has neighbouring countries that would be too glad to buy Zambian agricultural produce, why don’t we take advantage of this?
“The increase in transport costs is obviously as a result of the cost of fuel,” he said.
In the short term, Mr Chileshe said the Government must closely examine and rationalise the costs incurred between Dar-es-Salaam and Indeni.
“Are there some costs that can be removed? Can the organisations or institutions involved in the energy sector operate more efficiently? In the long run, Zambia needs to turn to developing its bio fuels capacity.
“But we must remember that the management of inflation is not an end in itself but it’s only a vehicle and has a broader and much more important goal of reducing poverty and improving the livelihood of the citizens. So whatever we do, this should be the focus,” he said.
He said the outlook of the Zambian economy in the coming months still looked well as long as the country stuck to strict management of the macro economic fundamentals that seemed to have yielded some dividends so far.
The Zambian economy maintained single digit inflation from December 2009 to February 2010 but inflation rose to double-digit status in March 2010.
The Government’s macroeconomic objectives in 2010 are to exceed five per cent growth and to reduce end-year inflation to 8.0 per cent as well as to limit domestic borrowing to 2.0 per cent of Gross Domestic Product (GDP).
[Times of Zambia]