By Mubanga Mubanga
Zambia Debt Alliance coordinator Peter Mumba says raising Monetary Policy Rate (MPR) by 100 basis point to 11.0 per cent by the Bank of Zambia (BOZ) is a short term solution to reducing inflation.
Speaking in an interview with Daily Revelation, Mumba said going forward, BOZ should look at finding long term solutions to control inflation rather than short term remedies.
“l think going forward this could be a short term remedy, but I think it is quiet important to deal with long term vulnerabilities that we are experiencing.” Mumba said.
He said the increase in Monetary Policy Rate could be one of the conditionalities that Zambia has been given by the International Monetary Fund (IMF).
“They demand a low inflation. Some lMF conditionalities you know we have committed various things to the IMF, under the extended credit facility that we are on and one of the conditions is to keep inflation target region of six to eight percent,” he said.
He added that raising the statutory reserve ratios has an effect on the economy, especially on the private sector.
“l think raising the policy rate, and also raising statuses such as the kwacha and statutory foreign reserve ratios do have implications on how you, how the businesses in the local context are going to have access to Capital. This then speaks to the performance of the private sector, it speaks on how the private sector is going to develop,” Mumba said.
On the solution to the rising exchange rate which by close of business on Monday was trading at K23.8 to US$1, Mumba said the government needs to look for long term solutions among them finalizing the debt restructuring process and increasing exports.
“Because this will obviously give confidence to international investors. Then another thing we should also do is, look in the long term to see exactly what we can embark on as a country, so that we can sustainably increase the supply of dollar. One of them is obviously increase exports to a level that will be constant and sustainable to meet such shortages,” said Mumba.
