INCREASING MONETARY POLICY RATE WILL DAMAGE ECONOMY, WARNS M’MEMBE
Lusaka, Wednesday (May 15, 2024)
Socialist Party (SP) President, Fred M’membe, has voiced concerns over the Bank of Zambia (BoZ) Monetary Policy Committee’s (MPC) recent actions, stating that the significant increase in the statutory reserve ratio is hindering businesses from accessing affordable credit, thereby exacerbating the economic downturn.
Dr. M’membe pointed to the International Monetary Fund’s (IMF) recent downward revision of Zambia’s GDP forecast for 2024 from 4.7% to 2.3% as evidence of the economy’s struggles.
He highlighted that with an annual population growth of 2.5%, the real GDP growth stands at -0.2%, indicating a technical recession.
The SP President argued against further increases in the Statutory Reserve Ratio (SRR), suggesting that a reduction would be more beneficial.
He also expressed skepticism towards inflation targeting as a solution for reducing inflation, emphasizing that monetary policy alone is insufficient.
“BoZ’s efforts are being undermined by fiscal policies,” Dr. M’membe stated. “Raising the monetary policy rate will only inflict more harm on the economy.”
He urged the BoZ to maintain or reduce the current rate, criticizing the disconnect between the policy rate and commercial bank lending rates, which range from 25-28%.
Dr. M’membe accused commercial banks of unethical conduct, investing K14 billion of Constituency Development Fund (CDF) balances in government securities, and called for BoZ intervention.
The Opposition Leader is advocating for expansionary measures to stimulate economic growth and proposed the reintroduction of a facility similar to the K10 Billion Medium Term Refinancing Facility established during the pandemic to aid businesses and individuals affected by the current drought and subsequent power and water rationing.
Dr. M’membe has called for the MPC to consider the hardships faced by Zambians and for the BoZ to make independent decisions to support the struggling economy.