ZICA BEMOANS NEGATIVE IMPACT OF RAISED POLICY RATE, INCREASING STATUTORY RESERVE

RECENT actions by the Bank of Zambia (BoZ) to raise the policy rate and increasing the Statutory Reserve Ratios have had a negative impact on people and businesses alike.

This is according to the Zambia Institute of Chartered Accountants (ZiCA) president, Cecilia Zimba, at the ZiCA 2023 first quarter media briefing on various national matters issued in public interest on Wednesday.

The Monetary Policy Committee in February raised the Monetary Policy Rate by 25 basis points to 9.25 percent while increasing statutory reserve ratios by 2.5 percentage points to 11.5 percent.

But Ms Zimba said these developments have had a negative impact on people and businesses alike.

This, she said, could be a signal that some of the monetary policy issues that the central bank would like to address could be entirely beyond their control, and hence a different approach to policy making should be considered away from the inflation focus.

“We hold a strong view that central banks are agents of economic development, including agents of employment creation.

“Therefore, they must balance the developmental goals with the crucial task of macroeconomic stabilisation and price stability. Otherwise both stabilisation and development will be lost,” Ms Zimba said.

She said while ZiCA noted that the BoZ was keen to execute its mandate to control inflation, it implored them to exercise caution.

She pointed out the need to ensure that BoZ strike a balance to ensure that there was financial stability as well as economic stability during the implementation of their monetary policy actions.

“ZICA has been keenly following the developments in the financial sector particularly, the implementation of monetary policy. The recent MPC statement reversed some of its earlier inflation projections of attaining a single digit, to a new forecast where it is projected that inflation will persist on an upward trend for the rest on 2023.

“This is of concern and will have the effect of eroding some of the past economic gains noted. It may dampen growth, lead to increase in unemployment and raise the cost of borrowing further which is already at high sticky rates,” Ms Zimba said.