The central bank in Africa’s red metal producer Zambia on 20 November raised its benchmark interest rate by 125 basis points to 11.5% in an attempt to arrest its currency slide. The Bank of Zambia in a communique of the Governor speech expressed weariness of dislocated fiscus which has been a key theme for while.
“Moreover, implementation of measures that address high fiscal deficits, debt levels, debt service as well as liquidity constraints and dismantling of arrears remains very critical to achieving overall macroeconomic stability and economic growth,” Dr. Denny Kalyalya said.
The central bank remains alive to risks to growth exacerbated by a deepening energy crisis that is worsening the fiscal through increased funding for power imports.
Barely a week to the rate decision meeting the BOZ hiked its overnight bank to commercial banks by 1,000bps to 28% but has maintained the OLF rate despite the 125bps adjustment to the BPR.
Economic think Head Dr. Lubinda Habazooka however criticized the central bank for using antique tools and methods to manage monetary policy in a note on his social media page.
“Reserve Ratios, Policy Rates, the Repo rate were designed a long time and these cure only symptoms not the illness. Let’s work together to create a sustainable way of encouraging forex inflows. I advise that we move away from the regression analysis is and look at other non quantifiable factors such as weather patterns, climate change, moods, opinions to estimate market behavior.”
The Kwacha Arbitrageur