Bank of Zambia gets thumb up from economists on strategies to keep monetary policy rate steady

The Economic Association of Zambia (EAZ) has supported the Bank of Zambia (BOZ) on its decision to maintain the Monetary Policy Rate (MPR) at 13.5 percent, describing it as a prudent approach to balancing inflation control with economic stability and growth.

EAZ Vice President, Mbanji Milambo, acknowledged that while inflation remained above the targeted 6-8 percent range, the Monetary Policy Committee (MPC) considered the current stance appropriate given the prevailing economic conditions.

In a statement issued in Lusaka on Sunday, Milambo pointed out that the inflationary pressures were primarily driven by external factors, such as drought and global commodity price fluctuations.

He noted that the Bank’s decision took these factors into account, recognising that more aggressive monetary tightening might not effectively address these supply-side challenges and could potentially hinder economic growth.

“The EAZ believes that aggressive tightening might not effectively address these supply-side factors and could instead hinder economic growth,” he stated.

Milambo further highlighted that the BOZ’s decision was based on inflation forecasts that anticipate a gradual decline due to ongoing fiscal reforms and external debt restructuring efforts.

He noted that the Bank’s inflation outlook was optimistic, assuming that these reforms will help bring down inflation.

“The Bank of Zambia’s inflation outlook might be optimistic, assuming that the external debt restructuring and other reforms will bring down inflation,” he said.

He emphasized that maintaining a stable monetary policy rate would help stabilize expectations and allow fiscal measures to take effect across the economy.

“The Economics Association of Zambia (EAZ) believes the MPC’s decision to keep the MPR at 13.5 percent is a balanced response to a complex economic environment characterized by elevated inflation, external shocks (such as drought), and the need for economic growth and financial stability,” he stressed.

Milambo concluded by stating that the success of this strategy would depend on the continued implementation of fiscal reforms, the adoption of sustainable economic practices, and the resilience of the financial sector.

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