Kitwe’s Kamfinsa Member of Parliament and PF National Youth Chairperson Christopher Kang’ombe has charged that the Bank of Zambia’s decision to increase the kwacha and foreign currency statutory reserve ratio is an act of desperation by the UPND Government.
Monetary policy refers to the measures or actions taken by the monetary authority of the country (the Bank of Zambia in this case) to alter the quantity, availability and cost of money or credit in the economy.
According to the Bank of Zambia (BOZ), the price stability goal is attained when the general price level in the domestic economy remains as low and stable as possible in order to foster sustainable economic growth.
In Zambia, the price stability objective is attained through the achievement and maintenance of inflation within the target range of 6 to 8% over the medium term.
Eng. Kang’ombe said the revision of the Statutory Reserve Ratio from 9% to 11.5% will result in reduced money supply in circulation.
“From the statement by the Bank of Zambia (BOZ) on increasing the Kwacha and Foreign Currency Statutory Reserve Ratio, one does not need to be an economist or financial expert to read between the lines and conclude that this is an act of desperation by the UPND in government. By announcing that the Statutory Reserve Ratio has been increased from the current 9% to 11.5%, BOZ has been authorised by the current government to effectively mop up liquidity through getting a bigger share of deposits that commercial banks in Zambia receive from all categories of clients. To simplify this for the public to understand, what will happen is that there will be reduced money supply in circulation,” he said.
“Legally, BOZ is empowered through an Act of Parliament to take any step they deem necessary but we should all remember that such decisions have to be under the guidance of the cabinet and the political party in power, which decides government policy. The BOZ statement which was issued by the Deputy Governor, and its contents, demonstrate a lot of desperation and a sign of failure by the government to put in place any other measure that will improve the performance of the kwacha against other major foreign currencies,” Eng. Kang’ombe stated.
He has since called on President Hakainde Hichilema to immediately convene a meeting to review all the ‘bad’ policies made so far by the government that are affecting economic growth.
“Here are my suggestions to President Hakainde Hichilema;Urgently assign a team to brief you on the recommendations in the Industrialisation and Job creation strategy ( launched in 2014 by Dr. Guy Scott on behalf of Government) and implement those that are very clear in context. Urgently convene a meeting to review all the bad policies made so far by the government that are affecting economic growth such as increased cost of fuel and increased electricity connection fees. Begin giving incentives to Micro Small and Medium Enterprises to be able to thrive and create the right amount of local jobs.”
“Instruct the Bank of Zambia to immediately reverse their guided decision to increase the Statutory Reserve Ratio. Immediately assign another team to brief you on the top 10 commodities we are importing as a country that we can actually manufacture locally in large quantities with the right quality. The Engineering Institute of Zambia (EIZ) can be engaged on the manufacturing solutions needed. Revert to the previous Mining Tax Regime that allowed; Mineral Royalty not to be Tax Deductible Mineral Royalty to be calculated using the aggregate formula as opposed to the incremental formula. Implementing 6.1 and 6.2 will lead to more revenue for ZRA ( which income we lost when the Minister of Finance announced the two above incentives for mining companies in the 2022 and 2023 budget speeches),” Eng. Kang’ombe said.