Zambians are expected to continue facing hard economic times with escalating poverty levels if government fails to urgently implement corrective fiscal measures, says the Centre for Trade Policy and Development (CTPD).
Reacting to the Bank of Zambia’s (BoZ) hiked Monetary Policy Rate (MPR) to 10.25 per cent, CTPD’s lead researcher Bright Chizonde hailed the central bank for taking the bold move at trying to contain rising inflationary pressures and arrest the country’s economic downturn.
He, however, cautioned that Zambians should expect to continue facing hard economic times with escalating poverty levels if government failed to urgently implement corrective fiscal measures.
“The recent statement by the Bank of Zambia’s Monetary Policy Committee indicates that Zambia’s economic performance has continued to deteriorate on account of fiscal pressures limiting monetary policy interventions. Zambia’s inflation is expected to increase, exchange rate depreciation will further increase debt service payments and economic growth is projected to showdown. Zambians are, therefore, expected to continue facing hard economic times, with poverty levels escalating if fiscal corrective measures are not urgently implemented,” Chizonde stated in a press release, Monday.
“During these hard economic times, citizens need to know that prices of goods and services are likely to go up as inflation breaches the 8 per cent upper limit. The only glimmer of hope is that the Bank of Zambia has proactively stepped up in confronting the economic challenges on the monetary side, this is commendable. CTPD would like to commend the Bank of Zambia for providing monetary policy oversight despite increased pressure from the fiscal side; we join the (central) bank in stressing the need to implement urgent corrective measures to set the fiscal deficit, debt levels and debt service payments on a sustainable path.”
Chizonde feared that investor confidence would continue eroding if the Ministry of Finance failed to implement corrective fiscal measures to contain Zambia’s ballooning debt, among other pressing challenges.
“In the absence of corrective measures on the part of the Ministry of Finance, as indicated by the ever-widening fiscal deficit now at 7.6 per cent of GDP, instead of the targeted 6.1 per cent, which reflects higher than programmed spending on capital projects and debt servicing on external and domestic loans, Zambia continues to register reduced investor confidence and negative market sentiments. This has increased pressure on monetary policy as indicated by an increase of yield rates on government securities,” said Chizonde.
“CTPD strongly recommends for urgent and effective implementation of fiscal adjustment measures in order to put fiscal deficits, debt levels and debt service payments on a sustainable path. This is the only way to restore both domestic and international investor confidence. Government should engage in extensive consultations with technocrats, private sector players, intentional institutions, such as the IMF and, indeed, local and international civil society organisations in order to find remedial and long-term solutions to the current economic situation.”
Last Wednesday, the central bank hiked the MPR to 10.25 per cent from 9.75 per cent, representing 50 basis points, for the first time in over a year, in response to rising inflationary pressures, exchange rate volatility and weak economic growth, among others.