MPC Dates the Public on Wed 21

Dr. Denny Kalyalya and his legion of economists have been hard at work over the last 48 hours poring through economic data and coming up with numbers that will be announced tomorrow Wednesday 21st at the MPC briefing. Some key announcements in recent weeks were the plan to restructure government debt. According to Reuters, “Zambia will rearrange loans from Chinese companies and instead look to borrow directly from the Asian giant’s government in a bid to satisfy International Monetary Fund conditions and unlock a potential $1.3 billion loan from the multilateral lender.” Further details of how this will be done are yet to be announced but we believe this will be hot on the new Finance Minister Hon. Margret Mwanakatwe’s agenda as she takes office from Felix Mutati.

The MPC announcement will come on the back of IMF Mission chief Boileau Loko issuing the following statement (published on the IMF Website) on 16th February 2018 in Washington which read “Discussions on a new ECF arrangement were put on hold in August 2017 after authorities unveiled new borrowings plans that threatened debt sustainability. Staff then requested for credible borrowing plans consistent with debt sustainability to resume program discussions. However, the latest borrowing plans provided by the authorities continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability and, ultimately, living standards of its people. Against this background, future program discussions can only take place once the Zambian authorities implement credible measures that ensure debt contraction is consistent with a key program objective of stabilizing debt dynamics and putting them on a declining trend in the medium term. The Fund will continue to engage with Zambia through our regular Article IV discussions and technical assistance.”

Without a doubt, Danny and co. will be looking closely at the policy statements as well as economic stakeholders concerns in carving rates that will shape the course of the economy in 2018. One of the areas they will be discussing will be GDP and inflation. Market research group BMI forecasts GDP growth (year on year) will be around 6% with Consumer price inflation at 8%. We expect inflation will remain in the single digit range in the near term. For that to happen though, the mechanics of the MPC will see them adjust rates accordingly to control inflation. Recent adjustments in fuel and the current maize meal debacle for example will be parameters that can easily act as exogenous forces on fundamentals. Financial Insight sees a cooling of the downward trajectory that characterized 2017 in terms of the policy rate. For now, we will wait and analyze the announcement that will be made tomorrow. Stay tuned.

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