Business

Reduced inflation rate to boost economy – PMRC

KELLY NJOMBO, Lusaka
THE Policy Monitoring and Research Centre (PMRC) says the sustained decrease in the inflation rate is expected to boost economic activities in the country as it is likely to trigger a reduction in the monetary policy rate (MPR) which currently stands at 15.5 percent.
Last week, the Central Statistical Office (CSO) announced that year-on-year inflation recorded in December had reduced to 7.5 percent, indicating a reduction by 1.3 percentage points.
PMRC executive director Bernadette Deka observed that a reduction in the inflation rate may not necessarily result in the reduction of food prices, but indicates that prices are increasing at a reduced rate, and Zambians can benefit from the stability in commodity prices.
Ms Deka said in an interview on Friday that a decrease in the inflation rate will enable the MPR ease commercial interest rates, thereby enable Zambians have access to finances.
“A sustained reduction in the inflation rate will allow the Bank of Zambia to reduce or loosen the monetary policy by reducing the MPR. A reduction in the MPR eases commercial interest rates and improves access to finance, allowing local investors to improve their participation in economic activities.
“A reduction in commercial interest rates will also enable ordinary Zambians access finance to improve their livelihoods and make various investments in real estate, housing and small to medium holding businesses,” she said.
Ms Deka, however, said Zambia has closed 2016 strongly by registering positive growth in the gross domestic product (GDP) recorded in the first half of the year.
She said the institute is encouraged by the improvements in the GDP, and that this indicates that Zambia’s economy is resilient, and the outlook is positive.
In the 2017 budget, Government set the target of GDP growth at about 3.4 percent, and an end year inflation target of not more than 9.0 percent. However, GDP growth is currently at 4 percent and inflation is below the 2017 target of 9 percent, as it currently stands at 7.5 percent.
“The growth has been attributed to the positive contributions of the information and communication industry, the construction industry, and the mining and quarrying industry. This is an indication of increased business activity within the economy, and a strong show of faith by investors in the economy,” Ms Deka said.
She said these economic conditions are conducive in accelerating Government’s bid to achieve its 2017 set targets of employment creation and economic diversification.
He said they will also ease the implementation of the 2017 budget as well as lead to sustained economic growth, improvements in the terms of trade, and a stronger exchange rate, if they are supported by sound fiscal and monetary policy.

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