Economic Analyst Warns of Disruptions in Zambia’s Monetary Policy
Local Economist Mr. Kelvin Chisanga has raised concerns over recent aggressive interventions in Zambia’s monetary policy, asserting that these moves, rather than reflecting key economic fundamentals, are causing distortions in the national credit structures.
Mr. Chisanga highlights challenges stemming from the copper industry’s impact on forex performance and negative contributions from offshore auctions.
Throughout the current calendar year, Zambia’s monetary policy has witnessed significant interventions, prompting Mr. Chisanga to question their alignment with actual economic fundamentals.
He points to the blame placed on local copper production for its adverse effects on foreign exchange performance, coupled with concerns about the impact of offshore auctions, contributing to an overall negative economic trajectory.
The Central Bank finds itself navigating complex scenarios, attempting to formulate the right policy objectives in the face of global and local economic challenges. Despite these efforts, the local market has struggled to meet anticipated levels, particularly in achieving the targeted 4.7% GDP growth.
Of particular concern is the rising cost of capital, with monetary policy operatives seemingly adopting a view that diverges from the economic reality. This approach, according to Mr. Chisanga, poses challenges for the growth of Small and Medium Enterprises (SMEs) and entrepreneurial development.
He predicts two unfavorable outcomes for Zambia’s banking sector: a squeeze on the credit pipeline and financial players encountering losses. Smaller local banks may face difficulties coping with the upturns in policy stimulations, leading to liquidity constraints in the domestic market.
This monetary approach, Mr. Chisanga estimates, could remove nearly K5.0 billion from the active economy, triggering cascading effects on goods and services.
The ongoing operations by the Bank of Zambia, particularly the aggressive adjustments to the statutory reserve ratio three times this fiscal year, are viewed as measures that could erode market confidence.
As Zambia grapples with these economic challenges, stakeholders are closely watching the unfolding developments, mindful of the potential repercussions on the nation’s financial landscape.
