"BOZ Implements Monetary Policy Adjustment to Counter Inflationary Pressure"

 

In a strategic move, the Central Bank has opted to increase the monetary policy rate, transitioning it from 9.5 percent to 10.0 percent. This decision has been taken to effectively manage and mitigate the ongoing challenge of inflation.

The Governor of the Bank of Zambia, Dr. Denny Kalyalya, pinpointed the primary contributors to the surge in inflation rates. These factors include the depreciation of the Kwacha, escalation in prices of essential commodities such as maize grain and meat, and the elevation of electricity tariffs. Dr. Kalyalya expressed concern regarding the projected rise in the cost of living, which is anticipated to surpass the established target range of 6 to 8 percent.

During a media briefing held in Lusaka, Dr. Kalyalya elaborated on the reasoning behind the decision of the Monetary Policy Committee to raise the monetary policy rate by 50 basis points. He acknowledged the commendable structural reforms undertaken by the government, evident in the reduction of fiscal deficits, the restructuring of external debt, and overarching endeavors to stimulate investment and encourage growth driven by the private sector.

Predictions regarding the nation's Gross Domestic Product (GDP) suggest a decline within the present year due to stagnancy in key sectors like mining, education, and energy. However, the economy is forecasted to rebound and expand by 2024-2025. Dr. Kalyalya emphasized the imperative of augmenting exports and providing support to local industries, as a trade surplus plays a pivotal role in fostering economic advancement.

He underscored the nation's tendency to import more than it exports, stressing the importance of endorsing locally produced goods. The Central Bank has continued to maintain cash reserves within the market to curb volatility in the exchange rate and stabilize the supply of crucial imported items. Notably, the mining sector's tax receipts contributed significantly to a second-quarter injection of US$300 million into the market.

External debt servicing has contributed to a decline in the country's gross international reserves, which contracted from US$2.9 billion at the end of March 2023 to US$2.7 billion by June 2023.

In parallel, the Bank of Zambia is actively engaged in financial sector reforms designed to enhance financial intermediation and inclusion, further bolstering macroeconomic stability and synergizing with the government's ongoing structural reforms. Additionally, the Bank revealed its decision to repossess the Development Bank of Zambia due to managerial deficiencies and a misalignment with banking and financial services regulations.