• The main implication is that there will be a reduction in money supply.
• There will be less money in circulation.
• The adjustment is quite small but it will have a daily effect on strengthening the currency.

An Economist says the upward adjustment of the Monetary Policy Rate will result into a reduction in money supply.
Speaking in an interview with FM News, Noah Kabwita however stated that the impact of the increase in the Policy Rate may not be felt anytime soon, because the adjustment is quite minimal.

Mr. Kabwita noted that the upward adjustment will affect the strengthening of the Kwacha because in the medium range frame from 2022 to 2024, the currency might be in the range of between K18 to K20.

“Of course, we will not see that impact there and then because the adjustment is quite small but definitely it will have a daily effect on the strengthening of the currency. And even inflation itself is definitely going to go down but the currency is the one being targeted because in the medium range frame from 2022 to somewhere like 2024, we are looking at a Kwacha that will be in the range like K18 to K20 there about,” Mr. Kabwita noted.

Meanwhile, Mr. Kabwita stressed the need for government to grow the economy based on production and not on the basis of debt or taxes.

“Basically, the economy really needs to grow on the basis of production and not on the basis of inflation. We need to grow the economy not on the basis of debt. We don’t even need to depend on taxes for the economy to grow, we just need to make sure that we control our expenditure and everything like that. So this is what we are expecting and I know going forward, we are going to see the Policy Rate being increased furthermore,” he added.

Bank of Zambia has increased its Monetary Policy Rate by 50 basis points to 9 percent from 8.5 percent in the last quarter to help steer inflation to single digits in 2022 within the 6 to 8 percent target range by mid-2023.