The Bank of Zambia says the pressure that led to the depreciation of the kwacha emanated from higher demand for the importation of petroleum products while supply declined and to help meet demand and dampen volatility in the exchange rate, the Bank of Zambia continued to support the market and sold a net of US$146.0 million.
BOZ governor Danny Kalyalya stated that in January 2022, increasing demand pressures continued and the Kwacha depreciated by 2.9 percent against the US dollar to a monthly average of K17.27.
Dr. Kalyalya also revealed that the Monetary Policy Committee (MPC), at its February 14-15, 2022 Meeting decided to maintain the Monetary Policy Rate at 9.0 percent taking into account the sharp decline in inflation since the November 2021 MPC Meeting and the forecast that shows a continued deceleration in inflation towards the 6-8 percent target range.
He however noted that there are upside risks to the inflation outlook that include increase in crude oil prices, initial effects of implementing the transition to cost reflective electricity tariffs, possible lower crop production due to adverse weather conditions, lingering supply chain bottlenecks, induced by the COVID-19 pandemic, and tightening of monetary policies in major economies in response to rising inflation in their jurisdictions.
speaking during a press briefing in Lusaka, the governor said the Committee also noted and welcomed the Government’s Medium-Term Budget Plan (White Paper) adding that the importance of successful execution of this Plan to the achievement of macroeconomic stability, including low inflation and a stable financial system, can hardly be overemphasized.
“At its February 14-15, 2022, Meeting, the Monetary Policy Committee (MPC) decided to maintain the Monetary Policy Rate at 9.0 percent. Key factors the Committee took into account in arriving at this decision include the sharp deceleration in inflation and its projected continued downward trend towards the 6-8 percent target range over the forecast period, ”he said.