BoZ won’t print money unnecessarily

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BUUMBA CHIMBULU writes @ SunZambia
THE Bank of Zambia (BoZ) will not succumb to political pressure to print money for the fourth coming general elections as it is not part of its functions.

BoZ Governor, Christopher Mvunga said there were rules that guide the way the central bank should operate.
The central bank, he said, would only print money backed by economic activity.
Mr Mvunga said Zambia was a member of the international institutions such the World Bank, and International Monetary Fund (IMF) and others which would not sit back and watch BoZ perform recklessly.
“I do not see any issue myself, it is a perception that we intend to print money for political events and elections. I would like to urge all stakeholders for the benefit of the country to keep politics away from the central bank.
“Our job is professional, it’s not a political job, the people working for the central bank are highly trained profession-als who I am sure through the ethical beliefs would walk away if you ask them to do something wrong,” Mr Mvunga said.
He said one of the functions of the central bank was to provide liquidity to the banking system to enable them function as effectively as possible.
Mr Mvunga has also said Zambia will not pay any of its creditors with a view that it will come up with a construc-tive forward looking plan for debt sustainability.
Bondholders last Friday rejected the country’s request to defer interest payments due on each of the bonds during the period from October 14, 2020 until April 14, 2021.
Zambia missed payment of US$42.5 million coupon on one of its dollar denominated sovereign bonds last month.
But Mr Mvunga, insisted that no creditor would be paid. He was speaking at a press briefing when announcing the monetary policy rate.
He explained that Government had engaged all its creditors for debt standstill and that positive outcomes had al-ready started to be recorded. Mr Mvunga emphasised that Government was currently making conscious decisions which would ensure debt sustainability plan
“It is not like we could not pay it is just that if we pay one creditor then we will have to pay all creditors so the conscious decision that we have undertaken is that we will not pay any of the creditors. “We will treat all of them equally with a view that we will come up with a constructive and progressive forward looking plan for debt sustainabil-ity which will allow us in future to meet all of our credit obligations,” Mr Mvunga said.
Meanwhile, the Bank Governor said the policy rate has been maintained at eight percent to moderate risks to finan-cial stability and support growth. He said this was meant to keep key interest rate at a record low and allow the im-pact of previous cuts to filter through the economy.
Mr Mvunga said the decision was also meant to allow monetary policy measures taken earlier in the year to take full effect.
He said this was despite projections indicating that inflation would persist above the six to eight target range through-out the forecast horizon. “The committee noted that financial stability remains fragile despite signs of marginal im-provement in economic activity in third quarter following the partial relaxation of Covid-19 restrictions. “Although growth is expected to recover in the medium-term, limited fiscal space, as well uncertainty surrounding the persistence of the Covid-19 pandemic and access to external financing remain key downside risks to growth prospects,” Mr Mvunga said.

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