IMF Responds To BOZ Governor Replacement

The International Monetary Fund (IMF) has responded to the dismissal of the Bank of Zambia (BOZ) Governor Denny Kalyalya and his replacement with former deputy finance minister Christopher Mvunga. 

Commenting on the matter in a statement IMF Media Relations Officer Lucie Mboto Fouda writes, “In response to media inquiry regarding the recently announced change in leadership at the central bank of Zambia, an IMF spokesman made the following statement:

“We note the change in leadership announced over the weekend at the Bank of Zambia before the end of the previous Governor’s mandate.

“The macroeconomic stability that most developing countries have enjoyed in recent years has greatly relied on the much-improved effectiveness and increased independence of central banks. It is imperative that central banks’ operational independence and credibility is maintained, particularly at this critical time when economic stability is threatened by the COVID-19 pandemic. Without credible institutions and sound policies, sustained economic growth and much needed improvements in living standards will not be possible.”

Ahead of his dismissal last week Kalyalya 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%. 

Relations with the IMF have proved trouble under President Lungu’s government. A bailout had been under discussion, on and off, for more than five years, with the Government rejecting an initial proposal in 2015, before returning to the negotiating table. The President then challenged the IMF to leave the country if they felt he had gone beyond the norms of good governance and democracy following the declaration of a state of emergency in 2017. The fund subsequently withdrew its representative to Zambia in August 2018. The major stumbling block to a deal appears to be concerns regarding Zambia’s debt sustainability.