EAZ calls for a broader approach to stabilise the economy

THE Economics Association of Zambia (EAZ) has advocated for a broader approach that includes open market operations (OMO) and other liquidity management tools to stabilise the economy without heavily burdening borrowers.
Mbanji Milambo, the EAZ vice president noted that by allowing market forces to play a more significant role in balancing demand and supply, the Monetary Policy Committee (MPC) could help manage inflation without overly constricting economic activity.
Furthermore, Mr Milambo said a targeted focus on enhancing local production in essential sectors such as agriculture and energy would alleviate cost push inflation and reduce the country’s reliance on imports, ultimately easing pressure on the Kwacha and helping to stabilise the currency.
Mr Milambo said this in a statement issued yesterday in reaction to the Monetary Policy Rate announced by the Bank of Zambia which was increased to 14 percent.
“To achieve the intended inflation, target sustainably, the EAZ recommends a balanced approach where monetary policy adjustments are supported by complementary fiscal policies that strengthen productive capacity.
“Addressing structural issues in agriculture, energy, and manufacturing would create a more resilient economy, one less vulnerable to external shocks and more conducive to stable inflation,” he said.
Mr Milambo said while the EAZ recognised the intent behind the recent 50-basis-point increase in the Monetary Policy Rate to 14.0 percent as a measure to contain inflation, it did not fully align with this approach.
He added that the association believed that the MPC must adopt a more balanced strategy that leverages both demand- and supply-side instruments to manage inflation sustainably.
“Solely relying on demand-reducing measures, such as raising interest rates, could dampen economic growth by restricting access to credit for businesses and households, thereby stifling production and investment at a critical time.
”While the MPC’s policy rate hike signals a strong commitment to inflation control, the EAZ urges a more balanced strategy that harmonises demand- and supply side interventions.
This balanced approach would foster a more robust economic recovery, stabilise inflation sustainably, and enhance Zambia’s long-term economic resilience,” Mr Milambo said.