Governor of Bank of Zambia Optimistic About Current Account Balance

Dr Denny H. Kalyalya, Governor of the Bank of Zambia, has expressed optimism about the narrowing of the current account deficit during the first quarter of 2023.

He has described this situation as a “positive development” for Zambia’s external balance, and has pointed to lower investment income and reduced transportation expenditure as contributing factors to this improvement. “As the global economy recovers, we expect a faster rise in exports compared to imports, which will further strengthen our current account position”.

In March of this year, domestic credit growth slowed to 12.1% from 18.7% in December 2022, following reduced lending to the government. However, private sector grew in this period to 35.9% from 34.2%.

According to Dr Kalyalya, “the deceleration in domestic credit growth is primarily driven by reduced lending to the government. However, credit to the private sector remains robust, indicating ongoing economic activity and investment. The expansion of money supply is a result of increased credit to the private sector and valuation effects. It is important to strike a balance between credit growth and maintaining stability in the financial system”.

Zambia’s economic growth is projected to slow down in 2023 but rebound in 2024. Key industries underpinning this include the agricultural and mining sectors, as well as the growing information and communications, manufacturing, transport, and financial industries.

There are, however, some geo-political factors that are cause for concern. These include a restricting of global growth, hiking energy and food costs due to the Russia-Ukraine conflict, and the effects of climate change on the economy.

However, Dr Kalyaya is hopeful that, with close monitoring of global economic developments and appropriate policy measures, Zambia will be able to support a “sustainable and inclusive recovery”.

Photo via Lusaka Times.