THE Bank of Zambia says the country needs to reduce on her expenditure and switch to activities that will push the country forward.
It says movements in the exchange rate were sending clear signals that Zambia’s economy needed an expanded export base and a reduction in unnecessary imports.
It also says its monetary policy stance is appropriate even as the currency of Africa’s second-biggest copper producer fell to a record low.
The kwacha “has come under immense pressure,” mainly because of China’s move to devalue its currency.
In a statement, the central bank said China’s surprise decision on Aug. 11 roiled global markets and sparked a sell-off in emerging market currencies.
Zambian policy makers last month held the benchmark interest rate at 12.5 percent, after raising it twice last year to tackle inflation, which accelerated to a six-month high in August.
Tighter monetary conditions have failed to stem a decline in the kwacha, Africa’s worst-performing currency against the dollar this year.
The government had twice reduced its 2015 economic growth forecast as the price of copper trades near a six-year low.
Depreciation in the currency gave fresh impetus for the southern African nation to cut its reliance on copper that accounted for over 70 percent of exports, the bank said.
Commodity prices, including copper, had dropped with the Zambian economy impacted adversely through the decline in the price of copper, which had fallen to around US$4,900 per tonne from above US$6,500 per ton in 2014.