By Jane Chanda
Pricewaterhouse Coopers International Limited (PwC) country senior partner Andrew Chibuye says Zambia’s economic woes run deeper than introducing a new currency, requiring a comprehensive approach to tackling inflation.
Speaking on a Twitter audio-space discussing the Bank of Zambia’s (BoZ) introduction of new currency notes, Chibuye explained that designing and printing currency involved balancing various factors.
He noted that the BoZ may end up with slightly lesser value, which could help reduce cash usage and create a stimulus for electronic transactions.
According to Chibuye, the introduction of a new K500 note could also help combat money laundering activities, because individuals holding large amounts of cash would need to account for it or risk it becoming worthless.
Asked about the introduction of a new huge note of K500 which may signal a failure in controlling inflation, Chibuye said the issue was about the value of the Kwacha and what it could purchase today compared to previous years but that the erosion in value due to inflation was a concern.
Regarding the BoZ’s increase of the Monetary Policy Rate (MPR) from 14 to 14.5 percent for the first quarter of 2025, Chibuye said: “The way that I see this is that the MPR is but just one of the tools that is available to help bring stability in this regard and its effectiveness is significantly influenced by what’s happening in the rest of the economy.”
Chibuye likened the monetary policy to a painkiller that provided temporary relief, but that it was only one part of a broader treatment plan to address inflation. He said fiscal policy and the overall economy also played crucial roles in achieving stability.
“The country is sick, it has an illness. The illness being inflation, and you have treatments that can be prescribed to deal with the issue,” Chibuye said as he explained that monetary policy was like a fire runner for other actions which is aligned to give success to the treatment plan.
He also noted that the biggest part of the treatment plan was the economy, which needed to be productive and export-oriented to reduce pressure on the currency and bring down inflation.
On the relationship between monetary policy and economic growth, Chibuye noted that monetary policy alone could not deliver stability, reduction of inflation, or economic growth, describing it as a stop-gap measure. He highlighted the need for a more comprehensive approach to address the country’s economic challenges.
“The trade-off is that inflation isn’t skyrocketing but it’s still slowly going up by a small amount – a few basis points – every month,” said Chibuye.
