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New Monetary Policy in Zambia Likely to Worsen Living Conditions, Jesuit Scholars Say

The Logo of the Jesuit Centre for Theological Reflection (JCTR). Credit: JCTR

The new policy adopted by the Bank of Zambia (BoZ) to control inflation in the country might worsen the living conditions of the people of God in the Southern African nation, members of the Jesuit Centre for Theological Reflection (JCTR) have said. 

In November, BoZ Governor, Denny Kalyalya, announced a new Monetary Policy Rate (MPR), which he said will increase interest rates from 8.5 percent to 9 percent.

The MPR is expected to lead to an increase in bank interest rates, reduce the supply of money in the economy, and therefore bring down high inflation, which has plagued Zambia since 2019, the Jesuit scholars at the Lusaka-based research, education, and advocacy institution say. 

In a Wednesday, December 15 statement, JCTR officials say while the policy is expected to stabilize the economy, “contractionary monetary policy gradually slows down economic growth and even increases unemployment.” 

“The increase of the MPR to 9 percent has the potential to increase poverty levels in the country and worsen living conditions,” the Jesuit scholars say in their statement.

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They explain that the MPR may increase poverty levels because of some of its trickle-down effects including the extended periods to repay loans or increase in the monthly repayment of loans to banks.

“The expected unemployment as a result of an increased MPR would worsen the socio-economic context of recent years that has been characterized by contracted growth and eventually a recession on account of COVID-19,” JCTR officials say.

They add that “a 2019 study using micro level labor force survey data does indicate that an increase in the Bank of Zambia policy rate increases unemployment.”

“This negativity impacts the availability and cost of credit in the economy which makes it more difficult for the private sector to expand and create more jobs,” say officials at the institution that was founded by the Jesuits of the Zambia-Malawi Province in 1988.

In the Basic Needs and Nutrition Basket (BNNB) report that stipulates Zambia’s cost of living for November, JCTR officials emphasize the need for the government to guard the nation against increases in the indicators of the current trends in the economy (macroeconomic variables).

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They say the macroeconomic variables such as inflation “erode the disposable incomes of households in the long run thereby compromising living standards.”

“Economic growth remains essential to seeing the much-needed government revenue and job creation,” the Jesuit scholars say in their December 15 statement. 

For this reason, JCTR officials call on the government of Zambia to actualize social protection interventions set out in the 2022 national budget to cushion Zambians “so that poverty does not worsen in view of the expected increase in unemployment.”

They also urge the government to take “pro-poor policies” in view of uplifting the living standards and conditions of the marginalized, the vulnerable, and the less fortunate citizens. 

“Therefore, JCTR implores the government to promulgate pro-poor policies, especially those which will reduce the cost of living, promote the common good and preserve human dignity,” say the Jesuit scholars.

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This story was first published by ACI Africa on 16 December 2021