The Policy Monitoring and Research Center (PMRC) has called on the Bank of Zambia to continue exploring several ways in which to cushion the fall of the kwacha and also ensure monetary stability.
In a statement issued to Money FM News, PMRC Executive Director Bernadette Zulu said the central bank should also consider lowering interest rates and increasing liquidity in the country’s financial systems through a combination of measures.
“As a developing country with minimal hedging mechanisms, Zambia’s currency volatility affects inflation levels, debt denominated foreign currency and trade financing which has implications for competitiveness, trade, and market diversification in the long run,” Mrs Zulu stated.
Mrs Zulu said the measures should include lowering capital barriers and reserve requirements, creating temporary lending facilities for banks and businesses, and easing loan terms.
“One of the suggested ways that we may need to interrogate in order to stabilize the kwacha exchange rate is for the Central Bank to put in place measures to prevent business houses that are pricing locally traded goods and services in foreign currencies, especially the US dollar.”
“The Bank of Zambia interventions have been reasonably effective regarding short- to medium-term volatility by the purchase and sale of Forex and changes in the interest rate on public bonds, thereby sterilizing the effects on the money supply,” She said.
She further urged the Government to adopt various fiscal measures to sustain economic activities, which should include temporarily deferring tax payments and increasing guarantees and loans to businesses.
“We shall continue playing our part to ensure that our post –COVID economic recovery is effective. Our call for Government, therefore, is to consider exploring ways through which some of the evidence we have presented can be considered so as to strengthen our currency and contribute towards economic recovery,” she stated.