By KENNEDY MUPESENI –
THE upward adjustment in the statutory reserve ratio from 14 to 18 per cent will mop up liquidity of up to K900 million which is significant to contain the Kwacha volatility, the Bank of Zambia (BoZ) has said.

. Kalyalya

BoZ governor Denny Kalyalya said at the Zambia Chamber of Commerce and Industry (ZACCI) breakfast meeting in Lusaka yesterday that the central bank decided to be proactive by tightening the monetary policy further through an upward adjustment.
“It is for these reasons that BoZ decided to be proactive by tightening monetary policy further through an upward adjustment in the statutory reserve ratio from 14 to 18 per cent aimed at mopping up liquidity up to K900 million,” Dr Kalyalya said.
He was aware that some stakeholders had expressed displeasure over the measure but assured that the primary reason was to contain the instability which had arisen in the foreign exchange rate, posing significant threat to the country’s inflation.
Inflation remained the most pernicious of taxes which if not addressed the country could not be able to make meaningful progress in supporting investment as well as economic growth.
Although the tightening in monetary policy in 2014 and 2015 had helped support macro-economic stability, Dr Kalyalya said a consequence of that tightening had been a marked reduction in credit and money supply growth.
Interest rates had also arisen, although that reflected the level of the fiscal deficit which had seen the yield rates on Government’s determination to achieve fiscal consolidation which would result in the better balance between fiscal and monetary policy.
He observed that one of the critical impediments to promoting dialogue and investment was lack of reliable timely and credible economic data.
The central bank was concerned that industrial players like ZACCI responded to the Ministry of Finance’s call for budget submissions, but that the potency of submissions was undermined by lack of collaborating data that supported evidenced based decision making.
ZACCI president Geoffrey Sakulanda said monetary policy implementation had a direct bearing on the operations of businesses.
“More specifically we would like the Governor to highlight how the central bank intends to deal with the depreciation of our currency as well as high volatility in the exchange rate experienced because we are concerned as it has made it difficult for business houses to plan,” Mr Sakulanda said.