Twangale Park was the venue for a special event on 28th May 2019. For many weeks, the Central Bank had been preparing for what would be the most important Monetary Policy Announcement of 2019. The announcement was made a week prior with much critical acclaim and international notice.
Background
The Genesis of the concept started in Q1 2019 when the Founder of Financial Insight made a relentless approach to the Public Relations Division of the Central Bank on the need for discourse around MPC. Financial Insight had been publishing commentary around every announcement (available here) that is made and its impact on businesses. However, this was and still is a text book activity. What better way than to have a sit down and discuss, from an outside in perspective, some of the details that went into the decision that was made? Brilliant! Have a breakfast event with captains of industry and key stakeholders.
The MPC Announcement
The Q2 announcement would came at a time when ubiquitous negative sentiment, both local and abroad, aired through all forms of media. The central bank remained steadfast to assert its position on all things Monetary Policy.
The announcement came with astute followers of MPC knowing that a rate hike was eminent after the assessment of economic data such as the inflation rate, fiscal deficit and the exchange rate.
Fifty basis points increase was the final decision and Governor Kalyalya made it at a press briefing on 22nd of May at the Central Bank. The reaction was instant. It was as though the markets were waiting with baited breath as the Kwacha quickly made gains against the green back towards the end of the week. Commercial banks, who have in the past been seen as being lacklustre when it came to reducing interest rates during the 5 quarters when the Central bank had maintained one of the lowest policy rates in over 5 years, quickly moved in unison with the pages of the local printed press on 27th May being filled with notices to their customers on the rate hike and its implication to already existing loan facilities.
An MPC Breakfast
For invited guests to this unique event on the 28th of May, it was an opportunity to hear from the Governor what this MPC meant to them. The central bank public relations team ensured that there was a plethora of representation that ranged from the business community, organizations of note that make commentary on the state of the economic and objective social media influencers and pundits.
Twangale Park served the warmest and delicious breakfast on the morning as invited guests were ushered in. Speaking to many, as they served up their plates with a full English breakfast, one got the sense that this event was an important moment that should have happened much earlier.
Ushered in by the Acting Head of Public Relations, Lady Besnat Mwanza, who gave an assertive account of why various stakeholders were invited to this event. In his trade mark swagger, Governor Denny took to the podium and gave a recap of the lengthy announcement he had made the previous week.
His account of this Q2 decision was very clear and pointed. A natural orator, Gov. Denny explained the process of the MPC decision making. Highlighting all the factors that went into the Q2 decision, many were educated on the fact that his Central Bank was forward looking by 2 years. Being able to forecast headwinds in the horizon allowed his team to put in place a Monetary Policy that could withstand exogenous shocks to a limit but also preserve the desire for economic growth.
He further clarified, when asked by an invited guest, that his team was in constant conversation with all the actors on the fiscal side of the economic equation. However, when probed regarding what could be done to sure up reserves, he pointed out that it was incumbent on Zambians to become the producers of goods and services domestically that would also be exported to draw in the much needed Greenback.
The issue of the 1.4 months cover in reserves was one that would not be avoided. This had been a burning issue from many sectors of society as well as international media. The Governor was quick to remind those in attendance that when a comparison was made with previous debt “pre Global Financial Crises” and the subsequent debt forgiveness, Zambia was delinked from the global economy hence had minimal scrutiny. However, the moment the country acquired Euorbonds for much needed infrastructure development, the markets in Europe and across the globe soon took notice of the copper producing country. This was the reason why international investors intently looked at the prevailing economic situation of Zambia hence having an impact on the yield rates of our bonds.
Following his recap, the question and answer session would soon become the highlight of the event as various stakeholders took to the microphone and asked burning question after questions. Interestingly enough and completely unanticipated was a comment regarding the lack of the right business education in Zambia from University of Lusaka.
The Governor who was ably assisted by one his Directors in the Question and Answer, amply responded to each and every question that was raised. When it was all said and done, leaving the meeting gave me a clear picture of not only what the Central Banks role was regarding MPC, but where we were as a country going forward.
This article is sponsored by Bank of Zambia