DODIA PRAISES BANK OF ZAMBIA

By Arnel Chitundu

ECONOMIST Yusuf Dodia has emphasized the need to appreciate the role the Bank of Zambia plays in providing stability and confidence in the monetary system of the country.

Speaking to The Scoop, Mr. Dodia said the Bank of Zambia (BOZ) has a set of tools they use to stabilize the economy.

“BOZ puts in place some mechanisms that ensure the confidence comes from Zambians appreciating that their money has value and that their money when used will be accepted by everybody,” Mr. Dodia said.

He added that confidence in BOZ assists when customers place their money in the bank and want to withdraw their money, is given on demand.

He said BOZ may shift the Monetary Policy Rate so that banks could lend to each other and borrow from each other without hesitation because it was key that banks supported each other for them to service their customers.

He explained that the adjustment of the Money Policy Rate was done at levels that banks were happy with the rate and able to borrow from each other bringing stability to the monetary system as well as market confidence in the banking system.

“Kwacha and Dollar relationship becoming volatile is not good for an economy,” he added.

He explained that what happened was that BOZ began to either release United States Dollars to the market to stabilize the Kwacha against the dollar because more dollars on the market entailed, the price of dollars began to fall.

He explained that this could be done by ensuring the Dollar/Kwacha rate was not changing every day.

He noted that this could create a shortage of Kwacha, so that people did not buy dollars because they had less Kwacha through the Statutory Reserve Ratio.

He stated that the SRR had gone up in the past months, meaning BOZ was trying to reduce the amount in circulation to maintain the Kwacha to Dollar relationship.

He explained that it had a negative effect, as it was stopping the economy from growing by removing kwacha from circulation, which also meant slowing down economic development.

“This means the businesses that want to expand begin to slow down and the growth of the economy slows down as you increase the statutory ratio,” he said.