The Chamber of Commerce in North Western Province has described the upward adjustment of the Monetary Policy Rate (MPR) by the Bank of Zambia as a contractionary measure aimed at controlling inflation pressure.
Chamber president Mukumbi Kafuta said this is because of late there has been a lot of pressure in terms of inflation hence increasing the MPR.
Mr. Kafuta stated that the upward adjustment has been done in order to slow the growth of the money supply on the market.
He said this is important in that it will slow economic growth while at the same time keeping commodity prices in check.
“In other words that’s a measure that will make prices not to escalate so much,” said Mr. Kafuta.
He said the adjustment is intended also ensure that inflation remain anchored on the medium term to moderate the fragile financial sector.
He said Zambia has had challenges with the economy which he attributed to the impact of Covid19.
“So in an effort for government to fix the economy, those are some of the measures it is putting in place. This will actually support economic recovery in the medium term,” he said.
He however indicated that local companies will be deterred from borrowing from commercial banks due to higher interest rates but attract foreign direct investment which he said will lead to the appreciation of the Kwacha in the medium to long term.
He said because of the policy rate adjustment and the subsequent stability in the economy, it will result in the removal of subsidies on certain commodities such as fuel among others.
“So that the rate becomes attractive to foreign direct investment because for a long time interest rates in Zambia have not been attractive to foreign investment,” he said.
“Now what government needs to do is to ensure that as foreign investment starts coming into the country, the local companies especially SMEs by those investments so that there is job creation and ultimately grow the economy,” he said.
