THE Zambian foreign reserves position is reasonably well with over three months import cover, says Bank of Zambia governor Denny Kalyalya.
He told the media at the monetary policy rate briefing for the fourth quarter of 2015 that the Bank of Zambia was not under any pressure to make unnecessary interventions in the foreign exchange market using reserves.
“The reserves position is reasonably well, we have over three months import cover and we are not under pressure to make interventions which we do not want to do,” he said.
He said no country in the world could sustain interventions in the foreign exchange market no matter how big the reserves were.
Dr Kalyalya said the central Bank was using the reserves for emergencies such as dealing with the volatility of the kwacha but was quick to mention that they were used in a prudent manner.
“If the market has to move, we accumulate these reserves to try and deal with those emergencies, in that case we have to use that very judicially, you do not have to be reckless in how we do it so there will be instances when circumstances compel you to dig deep,” he said.
He said the reserves had helped to maintain and support the foreign exchange market.
“No country in the world can sustain interventions in the foreign exchange market no matter how big the reserves you have. “Even at an individual level you have savings for a rainy day, which is the context in which you support market. We undertake them but that is not the primary sources for the primary exchange rate process,” he said.
Meanwhile, Dr Kalyalya said people must start fashioning their minds in a different way with regards to the amount of money spent on elections because democracy was expensive.
Responding to concerns that political party expenditure was among the possible drivers of economic outlook, Dr Kalyalya said expenditure should not only be seen as productive but also consumption.
“There are direct costs that the Government has factored into the budget, but outside that we try to model that through the expectations, we tend to sometimes see this too negative, and yet we are saying that to gauge our democracy we need to have elections but when it happens we get very upset,” he said.
“Maybe we should start fashioning our minds in a different way and see the impact because elections are necessary; if you do not do that then you do not have the democratic dispensation that you are looking for.
“So I think it’s the way we manage the whole process in the finals analysis, but guess what, It will be over before the end of the year so we can move forward freely to do other things,” he said.