Govt cautioned against lowering lending rates

Mon, 29 May 2017 11:56:35 +0000

By BUUMBA CHIMBULU

IT is not wise to reduce lending rate for now because the Kwacha has started to lose value and which will inevitably affect living conditions, says international economist Dr Lubinda Habazoka.

Dr Habazoka said since most of the goods were imported, a weak kwacha would hurt the people and it was therefore important for government and other stakeholders to ensure that people access affordable essentials.

In an interview Dr Habazoka said the current performance of the Kwacha might force the Energy Regulation Board (ERB) to increase fuel prices which might push up prices of other commodities.

“They should have let the Kwacha gain at least to trade around K8.2 per dollar, that way we will reduce the cost of fuel as it is imported. As it is ERB might increase fuel prices due to the Kwacha losing value,” Mr Habazoka said.

He advised that the Central Bank could consider intervening towards the end of the year.

“The only thing we need to do is to strengthen the value of the Zambian Kwacha and, yes, it’s difficult to develop a country when lending rates are high but sometimes high lending rates teach businesses to develop,” he said.

He however said that Zambia’s economy has performed better than expected in the first quarter of 2017 as seen by reduced macroeconomic indicators, Dr Lubinda Habazoka has said.

Dr Habazoka said the reduction in macroeconomic indicators such as inflation and stable Kwacha had resulted in better economic performance.

“I think Zambia’s economy for the first quarter of 2017 has performed better than expected, “I think that tight monetary policy by the Central Bank and fiscal policy from Government have basically controlled money supply in the market that has led to the strengthening of the Kwacha and also reduction in inflation rate,” he said.

He observed that the Central Bank could have acted earlier on the monetary policy rate, may be in the middle of this year, to allow the Kwacha gain faster.

Dr Habazoka explained that the adjustment in the policy rate to 12.5 percent from the previous 14 percent may have an effect on the local currency.