BANK of Zambia Governor Christopher Mvunga says the central bank will not print out money for next year’s general election because elections do not warrant the criteria for printing additional currency.
And Mvunga has dispelled social media reports that the central bank plans to ban people from holding dollar accounts.
Speaking during the Monetary Policy Committee (MPC) briefing in Lusaka, Wednesday, Mvunga explained that an election did not warrant the need to print money by the central bank, contrary to common misconceptions.
Prior to Mvunga’s ratification of his position as the new governor in August, speculation was rife by several stakeholders that the former deputy minister would print more money to help finance the running of the economy ahead of the general election.
“Let me come to this question on the printing of money, I think I have come across it several times and at times I get confused myself as to what exactly is being made: do I have a mint machine in my office where you run it and people collect the money in boxes? Anyway, one of the core functions of the Bank of Zambia is to provide liquidity to the banking system to ensure that it continues to function effectively and support economic activity. The other thing that Bank of Zambia does is printing currency based on economic demand so as to support commerce and trade. So, those are the preconditions that we look at when we are looking at the supply of money in the country. I can now categorically tell you that elections or political events are not one of the determinants for the Bank of Zambia to look at when considering the issue of increasing money supply or not. So, to answer your question in short, an election event is not a trigger for printing of money by the Bank of Zambia. It’s nowhere near the Bank of Zambia criteria so we will not print money because of elections,” Mvunga said.
“So, it’s a role of the bank to ensure that there is sufficient liquidity at any given time to support economic activities. So, we will not print money, elections are not one of those conditions under which the Bank of Zambia will supply money into the economy. It’s not a commerce activity, it doesn’t bring in any productivity, it’s a constitutional requirement, it’s not a commerce issue. So, Bank of Zambia will not participate in that in terms of looking at money supply from a point of view of an election event and I hope this answer puts this matter to bed because it’s been coming up all over the place! We will not print money for the sake of an election, we will print money at any given time as long as it’s supported by commerce and trade in order to ensure that the market is functioning, the economic activities are functioning and are being funded.”
He added that one of the jobs of the Central Bank was to print money to ensure financial stability on the local market.
“Let me also make it very clear: one of the jobs of the Central Bank is to print money, and as I said, to support commerce and trade so it needs to be backed by economic activity in order to increase money supply in the system. You don’t just sit and print money where there is no opposing value or productivity happening. To give you an example, when you bring in all these old notes that are torn and worn out, what do you want the bank to do? Don’t we go and print the notes to replace the ones that you have brought? That’s printing money, that’s why I am saying we should be careful when we are talking about printing money because there are normal operation activities of the Bank of Zambia, which involves increasing money supply. We did talk about the issue of the bank wanting to see financial stability. So, when there is no liquidity in the banking system, the Bank of Zambia will lend money to the commercial banks to create liquidity in the system,” Mvunga said.
He further urged stakeholders to keep politics away from the Bank of Zambia, adding that he would not be swayed by detractors.
“Understand that the Bank of Zambia is an institution; the Bank of Zambia is not Mvunga; the Bank of Zambia has got systems, structures, guidelines, procedures, adherence to best international practice, so don’t confuse myself to the institution, I am just heading the institution, the institution is bigger than me. So, there are rules in which the bank operates, there are guidelines in which the bank operates. The bank is a member of international institutions, Zambia is a member of international institutions, such as the IMF, the World Bank so there are all these institutions that are watching what is happening; we subscribe to a number of international settlements, we are a member of all these numerous, we are a board member of Africa Exim Bank and all these other institutions. I don’t think they will sit back and watch the Bank of Zambia perform recklessly because of an individual. So, I don’t see any issue myself, it’s a perception and I would urge all stakeholders that for the benefit of the country, keep politics away from the central bank. Our job is a professional job, it’s not a political job. The people working for the central bank are trained individuals, professionals, who I am sure through their ethical belief will walk away if you are asking them to do something, which is illegitimate,” he said.
“Secondly, appointments to public office, like any other office attract criticism, both constructive, non-constructive and detractors. So, it is not unusual for my appointment to be criticised. So, I am neither moved myself nor phased, nor disappointed, it’s expected, it’s a public office appointment and subject to scrutiny and different people will view differently. As much as you can say so many that have criticised me, I can equally say there are so many people that have overwhelmingly supported me. So, my job is not to worry about who is criticised me; it’s the nature of the position. You will be criticised even for the position today, there are other economists that would think we should have done otherwise, there other colleagues that would think we are in a democratic dispensation. So, well, I am not worried myself, I think my key focus is to ensure that we drive this country to economic stability, that is my key focus. With regards to compromising the central bank, I have worked in International institutions myself and I know the standards that are required to operate a central bank so there is no way that I will compromise the central bank for expediency purposes.”
And Mvunga refuted social media reports that there were plans to bar people from holding dollar accounts.
“As I was walking through, I have been alerted that there is social media reports that is talking about banning of foreign bank accounts in Zambia and I just want to reassure all Zambians that the Bank of Zambia, neither the Ministry of Finance, is working on any such initiative to stop CSC accounts. So whatever you are reading on social media, please dismiss t with the contempt it deserves and I also hasten to say to all Zambians that it’s events like these that tarnish the image of the nation both locally and abroad and we ending up spending wrong signals and financial markets are very sensitive markets and we should be hyper careful in the sense in which we play social media games with the financial markets,” he said.
Meanwhile, Mvunga said the country will continue with the normal build-up of reserves as they are going into the gold bullion purchase programme.
“One of the key areas and we are intensifying that and it’s eminent, it’s really the gold purchases, we will continue with the normal build-up of reserves through open market operations when the market conditions are such that the Bank of Zambia can go into the market and buy dollars to place into reserves, that will continue as business as usual. Running parallel to that, we are trying to move as fast as possible to get into the gold bullion purchase programme. I think we are very close to that. I think before the end of the year, we will see definite results in terms of accumulation of gold bullion. The legal contracts are at the final stage and once those contracts have been signed then we will be able to move. So, there are negotiations that are currently going on and we should be able to sign soon. So it won’t be ‘talk, talk talk’…You will see something happening pretty soon and that should give you that level of confidence that we are building reserves both from open market operations and from the billion side,” Mvunga added.
He further said that inflation was anticipated to close the year around 16.7 per cent.