Economic Outlook Worse Than Feared, Says BOZ Governor

The governor of the Bank of Zambia (BOZ), Denny Kalyalya has announced that the country’s economic condition is worse than anticipated, with total GDP expected to contract by 4.2% this quarter - up from earlier projections of 2.6%.

Speaking to reporters in Lusaka on Wednesday, Mr Kalyalya attributed the decline to falling consumer demands, as well as a contraction in wholesale and retail trading. 

He added that the sharp rise in the number of Covid-19 cases had had a pronounced impact on Zambia’s economy. 

The governor also noted that credit to the private sector had dropped to about 10.4% of GDP, down from 19.5% last quarter. He said this was due to banks’ fears over the high risk of default and had not been abated by the government’s new lines of credit. 

Mr Kalyalya concluded that in order to achieve economic stability, Zambia must adjust its macroeconomic fundamentals and attain debt sustainability. 

Meanwhile, interest rates have been slashed from 9.25% to 8%, making it easier for Zambians to borrow money from banks but negatively impacting savers. 

Dr Kalyalya said this change in monetary policy would likely be adopted by commercial banks and was intended to safeguard the financial stability of people’s lives owing to the impact of the pandemic.