Editor's Comment

Concerted effort key to economic solution

ZAMBIA’S economy is not in its best shape and it goes without saying that it needs a concerted effort to turn its fortunes around.
Apart from the huge external debt, the country is also battling the domestic debt.
The country’s economic prospects have been worsened by the headwinds caused by the novel coronavirus (COVID-19) pandemic.
COVID-19 has negatively affected the domestic economy as the construction and tourism sectors have not been spared. Locally, business conditions deteriorated as the hospitality sector shut down.
The mining sector, too, was a victim of COVID-19 as Mopani Copper Mines was put on care and maintenance.
Limited travel internally also hindered the export market as borders were closed for long spells.
Notwithstanding the ravages of COVID-19, there was a silver lining in the country’s economic recovery efforts.
Copper, the goose that lays beautiful and glittering golden eggs for the country, has been bullish as production peaked while prices on the international market soared.
The unprecedented demand for the commodity from China drove exports of copper revenues around August and September.
Unfortunately, the country has suffered a setback after it missed an interest payment to bondholders.
But, despite this, there is still hope that Zambia can rise above its challenges if there is a concerted effort from all stakeholders.
There is need for assurance from people and institutions tasked to provide oversight in economic management where the future lies for the country.
Therefore, Bank of Zambia (BoZ) Governor Christopher Mvunga’s stance that he will not compromise operations of the central bank by going against set guidelines such as allowing printing of money not supported by commerce and trade is encouraging.
During the monetary policy committee’s decision press briefing in Lusaka yesterday, Mr Mvunga said the central bank will not go against guidelines and international practice of printing money where there is no value or productivity happening.
The assurance could not have come at a better time than now given the state of the economy, which has received beatings from debts and COVID-19, culminating into inflation rise from 7.5 percent in 2018 to 9.2 percent in 2019 and is expected to remain at nine percent in 2020–21.
The Kwacha, on the other hand, has performed poorly, falling around 30 percent against the dollar since the start of the year.
Given this scenario, there is need for economic managers to work around the clock to reverse the economic fortunes.
The country is looking to BoZ to provide direction and bring down inflation to 13.5 percent and to 10 percent in 2022.
After all, it is mandated to conduct monetary policy to attain minimum and stable inflation.
BoZ, like other central banks worldwide, is an autonomous institution which conducts monetary policy, regulates banks, and provides financial services including economic research.
Contrary to insinuations that the central bank will print money to facilitate campaigns by the governing party, the Patriotic Front, it regulates the amount of money in circulation.
BoZ has been performing this function by controlling the amount of money in circulation by buying or selling government bonds such as treasury bills.
Central banks play a crucial role in ensuring economic and financial stability. In the wake of the global financial crisis, central banks have expanded their toolkits to deal with risks to financial stability and to manage volatile exchange rates.
It is, therefore, expected to continue performing its role of stabilising the Kwacha against the convertible international currencies.
This should in turn translate into employment creation, nipping inflation in the bud and restoring confidence in the economy.



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