By ALICE NACHILEMBE
The Centre for Trade Policy and Development (CTPD) says the Monetary Policy Committee (MPC) should maintain the Monetary Policy Rate (MPR) at 8.50 percent as the Bank of Zambia sets to announce its monetary policy decision on Wednesday.
This is in order to give more time for the upward adjustment that was made in the first quarter of 2021 to take full effect.
CTPD Researcher Public Finance Management Wakumelo Mataa said that the center does not expect a downward adjustment of the Monetary Police Rate.
Mr Mataa said although there has been a slowdown in inflation since the last upwards adjustment, the prevailing rate of inflation at over 22 percent remains well above the 6 – 8 percent target range.
He said that the overall inflation rose to a quarterly average of 22.17 percent in the first quarter of 2021 from the previous outturn of 17.53 percent, driven mainly by an increase in food inflation as non-food inflation slowed down.
Mr Mataa said the long-term Monetary Policy alone cannot be seen as the silver bullet to address Zambia’s inflation dynamics but to robust monetary policy interventions, correcting the fiscal situation is of prime importance.
“This means narrowing the fiscal deficit by enhancing domestic revenue generation while ensuring that public expenditure adheres to sound public financial management practices as well as the austerity measures outlined in the Economic Recovery Program (ERP).
He said the second wave of COVID-19 in January, 2021 slowed down economic activity which had begun showing signs of recovery towards the end of 2020.
Mr Mataa said on account of reduced uncertainties surrounding the severity of the COVID-19 situation, especially with the news about the vaccines coming into the country, economic activity slightly improved towards the end of the first quarter of 2021.