Central Bank Governor Christopher Mvunga resigned his position effectively a week after announcing his final monetary policy statement that saw the policy rate being maintained for a consecutive quarter.
Chartered Accountant Christopher Mvunga was appointed Governor of the Bank of Zambia at the end of August 2020 and he took over from Dr. Denny H. Kalyalya who served as Governor from February 2015 to August 2020.
During his tenure, he presided over 4 MPC meetings. In his maiden MPC November 2020, rates were held at 8%. February 2020 saw the rate increased by 50 basis points to 8.5% which the Central Bank held until is his final MPC Statement in September 2021. COVID 19 and the resulting slowed economic growth were at the core of reasoning behind the MPC decisions.
A summary of his final MPC statement read,
“At its August 30-31, 2021 Meeting, the Monetary Policy Committee (MPC) decided to hold the Monetary Policy Rate at 8.5 percent. Inflation is projected to decelerate faster and edge closer to the target range than was earlier envisaged in the May 2021 MPC Meeting, mostly on account of the favourable outlook for the exchange rate and improved prospects for fiscal consolidation. In arriving at this decision, the Committee remained mindful of the subdued economic activity and existing vulnerabilities in the financial system. Implementation of fiscal adjustment measures premised on fiscal discipline, the dismantling of domestic arrears, enhancement of revenue collections, achieving a sustainable budget balance, securing an IMF Programme, and external debt restructuring remain critical to restoring macroeconomic stability”.
Mvunga’s last MPC statement echoed hope for an economy that had felt the brunt of COVID 19. Despite domestic economic activity remaining weak, the Central Bank expected it to strengthen in the medium term. “This is on account of expected positive performance of the information and communication, electricity, public administration, as well as education sectors”. However, food inflation remains a threat. Although there was disinflation in the August 2021, this was caused by the appreciation of the kwacha against the US Dollar. Seasonal low supply of some vegetables and fish continued to be the key drivers of inflation.
The Central Bank forecasts that “over the next eight quarters, inflation is projected to decelerate faster than was earlier anticipated although it will remain above the 6-8 percent target range. Inflation is now projected to average 22.6 percent, 15.5 percent and 11.9 percent in 2021, 2022, and the first half of 2023, respectively”. However, this is still outside the targeted range of 6-8%.
Positive international sentiment on Zambia has also helped. “Positive sentiments—arising from the receipt of Special Drawings Rights from the IMF, prospects of securing an IMF programme earlier than previously anticipated and progress with debt restructuring—are also expected to address fiscal imbalances and contribute to lower inflation expectations.”
With the resignation of Mvunga, the Deputy Governor was appointed to act. “In a statement, Presidential spokesperson Anthony Bwalya said President Hakainde Hichilema has since appointed Francis Chipimo, who was deputy governor, to start acting as governor with immediate effect.”