PeP SURPRISED THAT THE CENTRAL BANK KEEPS INCREASING STATUTORY RESERVE RATIO AND THE MONETARY POLICY RATE
…..Reiterates need for Govt to issue statutory Instrument to compel mining companies to remit gross proceeds of mineral sales back to Zambia…
Liberty House, Lusaka
1. As Patriots for Economic Progress (PeP) we are surprised that the Bank of Zambia (BOZ) keeps on increasing the Statutory Reserve Ratio (SRR) and the Monetary Policy Rate (MPR) in a quest to arrest the depreciation of the Kwacha, despite clear evidence that these two interventions are neither effective nor desirable.
2. The Statutory Reserve Ratio was at 9% at the beginning of this year, until it was increased to 11.5% in February, then to 14.5% in August and then to 17% in November and yet the Kwacha has not shown any signs of responding to these huge adjustments in SRR. The same has been the case with the Monetary Policy Rate which currently stands at 11% after being increased by more than 400 basis points in the course of 2023.
3. As Patriots for Economic Progress, we have always reiterated that the most sure and sustainable way to support the Kwacha exchange rate is by Government issuing a Statutory Instrument that would compel all mining companies to remit the gross proceeds of mineral sales back to Zambia. Currently only a small fraction of the forex proceeds from mineral sales is remitted back to Zambia. That is the reason we have a balance of payments (BoP) surplus on paper and yet there is a shortage of forex on the market.
4. As Patriots for Economic Progress, we are beginning to doubt the competence of the BOZ Governor Dr. Denny Kalyalya and his staff because they appear to be fixated on implementing wrong forex policies despite ample evidence that those policies do not work, but have a destructive effect on the financial services industry as well as the cost of living. Perhaps it is time to consider a new BOZ Governor. Someone who can formulate and implement progressive forex policies that can produce results.
Sean E. Tembo (SET)
Patriots for Economic Progress (PeP)