The Centre for Trade Policy and Development (CTPD) has expressed concern that the private sector expansion is being threatened by the continued tighter money polices put in place by the Bank of Zambia (BoZ).
CTPD is concerned that these measures targeted at ensuring price stability, may inadvertently lead to a decline in productivity as difficulties to access capital by businesses become a reality.
This is according to the CTPD Public Finance and Economic Policy Researcher, Elijah Mumba, in a statement issued on Thursday.
The Central bank through a circular dated February 2, 2024, raised Statutory Reserve Ratio (SRR) for commercial banks by nine percentage points to 26.0 percent from the previous 17.0 percent.
This move comes in response to rising inflationary pressures.
Responding to this move, Mumba warned that this may result in a slowdown of investment and economic activities critical for sustained economic growth.
“While the Bank of Zambia aims to combat inflation and shore up the Kwacha, the reduction in loanable funds from commercial banks implies a constriction in financial resources which could, otherwise, be channelled into the economy- particularly affecting the private sector,” he said.
He, therefore, offered suggestions on how to go about the current situation, pointing out the need to control expenditure from the fiscal side which had seen a significant increase over the past three years.
Mumba explained that rationalising spending could help alleviate pressure on the budget and complement monetary efforts to stabilise the economy.
He said such coordination was vital for achieving price stability and creating a conducive environment for private sector growth.
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