CONSISTENCY IN ECONOMY GUARANTEED - BoZ
By BUSINESS REPORTER THE Bank of Zambia (BoZ) has maintained the monetary policy rate at 9.75 per cent with a pledge to ensure consistency in the economy and affordable credit to the private sector.
Meanwhile, the Central Bank has also maintained the statutory reserve ratio at 5.0 per cent.
BoZ Governor, Denny Kalyalya, explained that assessment conducted by the Monetary Policy committee this week indicated that the current level was appropriate as inflation had been trending downwards.
He was speaking at a media briefing in Lusaka yesterday.
“After trending downwards for seven consecutive quarters, the annual inflation edged up in the first quarter of 2018, but remained within the 6-8 per cent target range.
“Inflation is projected to rise above 7 percent during the second and third quarter in 2018, but thereafter decline towards the lower bound of the 6-8 per cent range over the remaining six quarters of the year,” he said.
Dr Kalyalya explained that risks to inflation outlook were skewed to the upside and included lower crop production in the 2017/18 agricultural season as well as faster than expected increases in crude oil prices. He, however, said anticipated higher copper prices were expected to moderate inflationary pressures through the exchange rate channel.
Dr Kalyalya further explained that other than inflation, the committee took into account the subdued credit growth, particularly to private enterprises.
He said weak credit growth to the private sector, mainly driven by higher than programmes budget deficits, high lending rates and rising non-perform in loans was key contributor to economic growth fragility.
“Growth in total domestic credit slowed down in the first quarter of 2018, growing by 1.3percent compared to the 4.9percent registered in the fourth quarter of 2017. During the period, lending to Government expanded by 1.7percent compared to 5.3percent previously.
“On the other hand, credit to private enterprises contracted by 3.5percent against an expansion of 8.3percent in the fourth quarter. The contraction in Kwacha denominated loans largely accounted for this outturn,” he said.