THE Bank of Zambia is in the process of formulating a new monetary policy framework to control money supply for the regulatation of inflation and interest rates, says governor Denny Kalyalya
Dr. Kalyalya said the new monetary policy would lead to the development of other models that will help forecast Zambias’s inflation rate two years ahead.
Speaking at a breakfast meeting in Lusaka yesterday Dr Kalyalya said the new monetary policy would also ensure price stability and general trust in the Kwacha.
He told the gathering that there had been an increase in the interest rates which reflected the level of fiscal deficit following the decision by the central bank to tighten the monetary policy.
But the tightening the monetary policy has helped support macroeconomic stability though it has resulted in a reduction in credit and money supply growth.
The central bank aware of the displeasure exhibited by stakeholders due to the upward adjustment in the statutory reserve ratio from 14 percent to 18 percent.
He said the move was meant to mop-up liquidity to a tune of K900 million.
Dr. Kalyalya has meanehile stated that the growth of the economy could remain around 6 percent.
The governor said various factors had triggered a sharp deterioration in the exchange rate of the Kwacha which has depreciated by around 15 percent over the first quarter of the year.
Speaking at the same function Zambia Chamber of Commerce and Industry president Geoffrey Sakulanda urged the Central Bank to highlight some of the policies that would be implemented to strike a balance between managing the exchange rate and the interest rates.
Mr. Sakulanda said monetary policy implementation has a direct impact on the operations of businesses and that it was important that various stakeholders had access to such information on what the bank is doing.
He however said due to recent Government’s revision of the mining royalty tax, there will be implications that will leada budget deficit which was likely to increase domestic borrowing.