By BUUMBA CHIMBULU
OPERATING conditions at Zambia’s private sector firms continued to improve and moved to close to activity expansion zone in August last month.
This improvement was due to expanding consumer spending and subsiding inflationary pressure that enhanced household real incomes, according to Zanaco Monthly Economic Report.
Zanaco indicated that others were easing input costs linked to Kwacha appreciation, stable power supply and reopening of learning institutions.
“This is contained in latest survey data that suggest that Zambia’s composite PMI in August 2021 rose to 49.8 (four-month high) from 49.4.
“Even so, limited public sector opportunities, supplier delays, deliberate operational pause on electoral anxiety and labour shortages prevented a transition to the expansion path in general business conditions,” the bank stated.
Meanwhile, Zanaco stated that first quarter saw a growth of 0.7 percent in snippet show of positive growth in 2021.
This is linked to expectation of a resounding export sector performance, improved electricity supply and good agricultural sector harvest.
It is also linked to buoyant Information and Communication Technology sector, sharp decline in pandemic cases, heightened expectations of International Monetary Fund bailout package post-August elections and incidental external debt reorganisation.
“Nonetheless, we remain wary of elevated inflationary pressures, tight fiscal space and heavy government borrowing from the domestic credit market as downside risk factors,” the bank stated.
On the money market, Zanaco indicated that liquidity eased 57.4 percent in August to touch a fresh record high of K4.91 billion from K3.12 billion.
It stated that liquidity build-up came from maturities and loose balances belonging to offshore investors who have continued to pursue Kwacha-denominated bonds, but their overall effect was partially offset by outflows associated with settlement of Treasury bill and bond costs.
“The overnight interbank rate and deposit rates responded positively with declines but limited supply of credit as lenders exercised caution ahead of the polls saw lending rates tick up for the second month running,” the bank stated.
