Dear Editor,
INFLATION is a logical glass on which we see continued development in the complete levels of prices for most goods and services in the domestic market over a set period, usually takes an account of a year.
On a positive note, we anticipate a stable price level band to be characterised by a relatively low inflation tag, which should be definitely one of the most significant components to command economic growth and development respectively.
In general, the attainable concern here is that a steady inflation rate speaks of a healthy economy. We should therefore support the perception that a swelling inflation is detrimental to economic growth.
This is because price stability gets easily affected as well as it really gets to be a little bit challenging condition in the attainment of economic growth considering a number of difficulties that our domestic economy exposed to, especially in the recent months.
Nevertheless, we all determine that high inflation easily affects the price signalling mechanism, and this tendency can essentially lessen the country’s international competitiveness by generating some of our exports to be more unbearable, hence impacting strongly on the balance of payments which can start reversing our record on the reserves.
It is encouraging to see that we have some progress by accumulatively increase limits in our import cover to the tune of K1.4 billion on reserves.
However, it is just lately that the Bank of Zambia was sitting to budge on the policy rate and we are seeing these effects particularly at the time we should assume inflation to start feeding on agricultural produce.
It will be imperative for the central bank and stakeholders to keep monitoring our inflation trends to avoid a number of shortcomings associated with this movement so that there can be a provision to factor in a support base to salvo a negative relationship between inflation and economic growth, which is an elusive situation being produced here.
Going by the unfolding tendencies if this condition appears to persist, a tighter monetary policy can quickly help seal off this rising inflation.
But assuming a Zambian case scenario, we still have some serious difficulties with high inflation which I believe is connected directly with the exchange rate fundamentals.
So in short the forex market is currently the driving force as import factors are playing a critical role to the core inflation patterns coupled with a present-day profile of our debt portfolio.
KELVIN CHISANGA.
