FORMER Bank of Zambia (BoZ) governor Dr Caleb Fundanga has observed that the UPND government is not spending as much as the previous regime, which he attributes to the continued drop in inflation.

The Zambia Statistics Agency (ZAMSTATS) recently announced in its monthly bulletin that the country’s annual inflation rate for February 2022 has reduced to 14.2 percent from 15.1 percent recorded in January 2022, which was mainly attributed to the easing in prices of some food and non-food items.

And in an interview, Friday, Dr Fundanga, however, cautioned that it was not time to celebrate the drop in inflation, as the conflict between Russia and Ukraine might cause an oil price spike.

“It is not surprising, we all wanted it to drop. It’s not surprising, we had been hoping that it would fall. It has been going down continuously and I’m sure very soon we will reach single digit before the end of the current year. One should take this with caution because of the war that has broken out now in Ukraine. The price of oil is likely to spike and so it is not the time to celebrate but to be very, very cautious in what we do because if the price of oil goes up, and oil goes into everything that we do. Those are red signals because we are not out of the woods yet and we should be a little careful in whatever we do,” he said.

“Probably there could be a number of factors responsible for this, one obviously the new government in place. I think that the reckless expenditure that had characterised our economy in the previous regime has gone down. The government is not spending as much as the previous one was doing and so this obviously means that the money supply is growing at a reduced role and is a major contributor to the inflationary pressures. That is a good thing.”

Dr Fundanga said the good crop harvest in the 2020/2021 farming season also played a role in the drop in inflation.

“I think also last year we probably had a good crop [harvest] and that also is showing its impact in the sense that the pressures from the food inflation have been brought under control. If you go to the announcement of the Central Statistical Agency, I think they give some reasons why this was the case,” he said.

Dr Fundanga, however, expressed concern that the floods experienced during the 2021/2022 farming season might put pressure on the pricing of food products.

“Going forward, this year there are a number of places that have experienced flooding and so that is another area that might spoil positive developments we have seen. We are yet to get the assessment of the harvest focus which the Ministry of Agriculture does and only then, we will get an indication or better picture on the impact of the weather on the output. Obviously, food inflation is very important because everyone eats food and so if the price goes up, it may be bad. This year started off initially with poor rains but we started getting too much rain in a lot of parts of the country. So that could cause an impact on our output but I will rather exercise caution and wait for the crop forecast from the Ministry of Agriculture. Obviously, if the harvest is bad, it will put pressure on the process generally in the country,” said Dr Fundanga.