BOZ ACTS TO STABILISE ECONOMY
…says one contributory factor is quoting and pricing in US dollars
THE Bank of Zambia (BoZ) says it has resolved to deal with one of the developments making the exchange rate and the economy unstable, such as quoting and pricing in United States dollars.
The development has worried the central bank as it has continued to put pressure on the exchange rate while creating demand for the dollar.
This concern was raised by the BoZ Governor, Dr Denny Kalyalya, on Monday at the launch of the Monetary Policy Report and Stakeholder Engagement in Lusaka.
“We were trying but we did not succeed but one day we will and actually, our resolve now is this quoting and pricing in dollars…it is one of the things that makes the economy or the exchange rate unstable.
“Why am I saying that? In other countries they have taken measures to de-dollarise the economy because when the merchants are pricing or asking to be paid in dollars, you are putting pressure on the dollar,” Dr Kalyalya said.
He also talked about the central bank’s concern regarding speculators of the exchange rate.
Dr Kalyalya said much as these played an important role, they also had potential to hurt the exchange rate market by over playing their role.
“When the exchange rate is moving, there are those people who play the exchange rate, we call them speculators. They play an important role but they can also over play and hurt you.
“So, we need to be concerned about that and how we deal with that because what is happening is that when the exchange rate is depreciating, people start getting Kwacha convert it into foreign currency and hold that which means that demand is increased,” he said.
Meanwhile, Dr Kalyalya guided that the BoZ worked within reasonable expectations regarding using the monetary tools at its disposal to manage the exchange rate and the economy.
He explained that these were being used with a belief that they would make a positive effect.
“We are combining all the tools that are at our disposal. The foreign exchange is a tool itself, the policy rate is a tool, the Statutory Reserve Ratio is a tool too..so all these combined must work in a certain way to get the stability that you want.
“We deploy these tools to affect change. Sometimes they are used at the same time, other times you pick one and not the other because the time is not right for that. We are not in a normal situation,” Dr Kalyalya said.