ECONOMIST PROJECTS MAINTAINED POLICY RATE

By Lumbiwe Mwanza

ECONOMIST Yusuf Dodia has predicted that the Bank of Zambia will not increase the monetary policy rate from the current 9.50 percent due to the weakening of the Kwacha against other convertible currencies.

Early this year, the Bank of Zambia’s Monetary Policy Committee (MPC) announced a 25 basis points increase in the Monetary Policy Rate (MPR) to 9.50 percent. The decision was made during the May 15-16, 2023 meeting, which was driven by concerns over persistently high inflation and the fragility of the country’s economic growth.

The committee also took into account risks and vulnerabilities in the financial sector. The Bank of Zambia stated that it will closely monitor inflation outcomes, forecasts, and risks associated with financial stability and external debt restructuring in its future MPC meetings.

The next meeting is scheduled for August 21 and 22, 2023.

Speaking to The Scoop, Mr. Dodia said the monetary policy rate in Zambia no longer had a direct impact on the cost of doing business but on the cost of banking services in the banking sector.

“Unfortunately the monetary policy rate now has no direct impact on the cost of doing business in Zambia because if you look at the monetary policy rate and interest rate, they are completely devolved from each other.

“As you know that the Kwacha has weakened against other convertible currencies, I feel the bank of Zambia will maintain the monetary policy rate or if it has to go up, it will not go up significantly,” he said.

He further stated that the fluctuation of the Kwacha had continued to affect the cost of doing business as Zambia is a net importer.

He said that with increased foreign currency in the country, the Kwacha will stabilize thereby making the cost of doing business a bit favorable for product importers.