Contrary to denials by PF ministers, the Bank of Zambia (BoZ) has admitted that electricity rationing has exposed the country to emerging risks to the economy.
BoZ governor Denny Kalyalya told a third quarter Monetary Policy Committee media briefing in Lusaka that power deficit will adversely impact on growth.
And the central bank, through the monetary policy committee, has maintained the monetary policy rate at 12.5 percent.
BoZ governor Denny Kalyalya told a third quarter Monetary Policy Committee media briefing in Lusaka yesterday that external and domestic risks to inflation must be balanced against the risks of a sharper decline in economic output.
Dr Kalyalya said this should be done due to anticipated declines in the economic outputs than is currently anticipated in the wake of the emerging challenges in the energy sector.
“In this regard, external and domestic risks to inflation must be balanced against the risks of a sharper decline in the economic output than is currently anticipated,” he said.
He said annual inflation is projected to be slightly above the end year target of seven percent in the third quarter of 2015.
Inflation declined marginally to 7.1 percent in June from 7.2 percent in March 2015 for both food and non-food items.
Dr Kalyalya said the gross domestic product (GDP) is also likely to go down this year as a result of load shedding.
He, however, said it is currently difficult to have a full assessment of the adverse effects of load shedding as stakeholders are currently studying the matter and determine where interventions can be put in place.
Dr Kalyalya said the effects of load shedding need a full assessment to portray a clear picture.
He also said it is paramount that every player in the economy takes measures to ensure that the economic front does not get bad.
“As a measure to cushion the envisaged economic challenges, fiscal consolidation by addressing revenue shortfalls and rationalising expenditures will help to achieve fiscal sustainability and help in lowering yield rates on government securities,” Dr Kalyalya said.
He said this is critical in achieving a stable macroeconomic environment, which will enable lower interest rates that support economic activities.