• Bank of Zambia is at least not expected to drop the MPR from the current 9.0 percent.
• The Central Bank has to make a tough decision of raising the policy rate.
• This is in view of the global economic environment that has indicated a lot of inflationary pressure.

An Economist says Bank of Zambia (BoZ) is likely to raise the Monetary Policy Rate for the first quarter of 2023 from the current 9.0 percent to 9.25 or 9.5 percent.
Speaking in an interview with Money FM News, Emmanuel Zulu said the Central Bank has to make a tough decision of raising the policy rate in view of the global economic environment that has indicated a lot of inflationary pressure which is trickling down to heavy import countries like Zambia.
Mr. Zulu noted that Zambia is an import heavy country that has been battling with the spillover inflationary effects from the global economy, and with the current fiscal position, it is constrained in terms of resources, hence putting pressure on the Kwacha against the US dollar.
“We take note of the global economic environment which has indicated a lot of pressure especially inflationary pressure which is trickling down to other countries like Zambia which are importer of a lot of commodities especially fuel. Zambia recently was importing large quantities of fertilizer and other farming inputs and that put a strain on the Kwacha and this spillover effect has persisted with the Kwacha continuously depreciating against the US dollar.”
“So we are an import heavy country that has been battling with these spillover inflationary effects from the global economy. With the current state of the fiscal position, we are constrained in terms of resources hence the pressure on the currency because we have to meet quite a number of obligations with limited resources.
He said government has pursued a contractionary monetary policy direction, where they have been constraining the amount of liquidity in the economy in an effort to control rising inflation and has set inflationary target in the range of between 6 to 8 percent which now requires more efforts to attain this target.
“Just as the government will be announcing the Monetary Policy Rate, I do not expect a deviation from what the Bank of Zambia has already been taking which is contractionary in nature. So we expect that it will be another complementing direction with the Statutory Reserve ratio raising.
“So the Bank of Zambia is at least not expected to drop the MPR from the current 9.0 percent. The worst is that they have to take a tough decision of raising the MPR to 9.25 or the worst case scenario it might go to 9.5 percent,” Mr. Zulu predicted.
He however stated that raising the Monetary Policy Rate will entail an increase in the interest rates, while liquidity levels in the economy will be constrained.
“So it is I am sure something that they well calculated and also get to assess the net impact on the economy. If at all we have some room for growth even with the rising of the MPR, I think the government will still go ahead and do that because they have to achieve price stability, and also ensure that they are within the target range of inflation which is between 6 to 8 percent. So the least that I expect is that the Bank of Zambia may maintain the MPR but in the case,” he added.
Bank of Zambia is today expected to announce the Monetary Policy Rate (MPR) for the first quarter of 2023.
The Bank maintained its policy rate at 9.0 percent throughout 2022 on account of the continued deceleration in inflation and its projected further decline towards the target range of 6-8 percent by end-2023.