Press Statement:
UPND Government Fails to Manage Zambia’s Economy further Recklessly Reduces Money in Circulation
[6th November, 2023]
The Economic Freedom Fighters (EFF) expresses deep dismay and concern at the UPND government’s inability to successfully manage Zambia’s economy, particularly in light of the recent increase in the statutory reserve ratio and its implications.
The decision made by the Bank of Zambia on November 6, 2023, to increase the minimum statutory reserve ratio on both local and foreign currency deposits by 3 percentage points to 14.5 percent, effective from November 13, 2023, raises serious concerns about the government’s economic mismanagement.
We must not ignore the fact that this is not the first time such a decision has been made.
In February 2023, a similar increase in the statutory reserve ratio of 2.5 percentage points to 11.5 percent was implemented.
Despite these measures, the exchange rate has continued to depreciate, signaling the failure of the UPND government’s attempts to stabilize the foreign exchange market.
The increase in the statutory reserve ratio is meant to address the persistent foreign exchange market pressure and rein in inflation.
However, the consequences of this decision are severe and detrimental to the economy.
The negative effects include decreased credit availability, increased cost of borrowing, liquidity constraints within the banking system, contractionary impact on economic activity, and inflationary pressures.
The reduction in credit availability and the higher borrowing costs will hamper private investment and economic growth and lead to limited job creation.
This demonstrates the UPND government’s failure to support entrepreneurship and stimulate economic growth.
Furthermore, the liquidity constraints resulting from the increased statutory reserve ratio pose a threat to the stability of the financial system.
The inability of financial institutions to meet customer demands and potential liquidity shortages can trigger financial instability and erode confidence in the banking sector.
We are deeply concerned about the overall contractionary impact on the economy due to reduced access to credit, higher borrowing costs, and tightened liquidity.
This will limit consumption and investment, leading to increased unemployment and reduced standards of living for Zambians.
Additionally, the increased statutory reserve ratio may have unintended consequences, such as inflationary pressures.
The scarcity of goods and services resulting from reduced liquidity can cause prices to rise, undermining the purchasing power of consumers and worsening the economic challenges faced by the country.
The EFF urges the UPND government to reassess its economic policies and take immediate action to address the growing concerns regarding the mismanagement of Zambia’s economy.
The failure to strike a balance between managing exchange rate depreciation and safeguarding overall economic stability will have severe consequences for the long-term growth and prosperity of the nation.
We call on the UPND government to prioritize the well-being of the Zambian people and consult economic experts to implement effective policies that will promote sustainable economic growth, job creation, and ensure the stability of the financial system.
The EFF will closely monitor the situation and continue to advocate for economic policies that prioritize the interests of the people and guarantee their economic freedom.
Wherever we want to go our feet will take us there,
Kasonde Mwenda C.
President
Economic Freedom Fighters (EFF)
About the Economic Freedom Fighters (EFF):
The Economic Freedom Fighters (EFF) is dedicated to promoting economic freedom, social justice, and equality for all citizens. The EFF is committed to holding the government accountable and advocating for the well-being of the Zambian people.