1 / 38

BANK Of ZAMBIA

BANK Of ZAMBIA. FIRST QUARTER 2008 MEDIA BRIEFING BY DR. CALEB M. FUNDANGA GOVERNOR Bank of Zambia 28 APRIL 2008. 1.0 Introduction. Media brief: Reviews monetary policy outcomes; and other economic and financial sector developments in quarter 1, 2008; and

raina
Download Presentation

BANK Of ZAMBIA

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. BANK Of ZAMBIA FIRST QUARTER 2008 MEDIA BRIEFING BY DR. CALEB M. FUNDANGA GOVERNOR Bank of Zambia 28 APRIL 2008

  2. 1.0 Introduction • Media brief: • Reviews monetary policy outcomes; and • other economic and financial sector developments in quarter 1, 2008; and • Gives inflation outlook quarter 2, 2008.

  3. 2.0 NATIONAL BUDGET FOR 2008 • The Minister of MoFNP presented the 2008 National Budget to Parliament on 26 January 2008. • Major Macroeconomic targets for 2008 • Real GDP growth at least 7%; and • End year inflation of 7%. • A new fiscal regime for the Mining Sector was announced • Corporate tax increased to 30% from 25% • Mineral royalty on base metals at 3% (up from 0.6%) • A windfall tax to be triggered at different price levels

  4. 3.0 Monetary Policy • In quarter 1 of 2008, monetary policy focus: • consolidating macroeconomic stability i.e. maintaining single digit inflation (8.9%, December 2007). • By containing the growth of liquidity in banking system within the projected path.

  5. 3.1 Inflation3.1.1 Overall Inflation • Annual overall inflation rate • Single digit 9.8%, end-March 2008 (8.9%, December 2007). • Increase in food inflation (see Chart 1).

  6. 3.1.2 Food Inflation • Annual food inflation • 9.1%, March 2008 (5.9%, December 2007) • Higher prices of mealie-meal, maize grain, other cereals, cereal products, groundnuts, fresh fruits, chicken, fish (bream), beef, milk, eggs, oils and fats. • Higher production costs (electricity load shedding, rising transportation costs, lower seasonal supply, fishing ban & continued ban on movement of cattle from Southern Province- CBPP).

  7. 3.1.3 Non-Food Inflation • Annual non-food inflation lower, • 10.4%, March 2008 (11.9%, December 2007). • Relative stability exchange rate of Kwacha vs major trading currencies.

  8. 4.0 Money Supply and Domestic Credit4.1 Money Supply • Annual money supply (M3) growth, • 27.7%, March 2008 (26.3%, December 2007) (see Chart 2). • Rise in Net Foreign Assets (NFA) by 56.5%.

  9. 4.2 Domestic Credit • Domestic credit growth slowed down, • 7.1%, March 2008 (19.7%, December 2007). • Fall in net claims on government by 36.9%, despite a 28.2% expansion in private sector credit. • Excluding foreign currency denominated credit, which decreased by 3.6%, domestic credit rose by 10.7%.

  10. 4.2 Domestic Credit Cont... • Sector analysis • Credit dominated by: • Personal loans at 21.3%; • Agriculture 18.5%; • Financial services 13.7%; and • Manufacturing 10.7% (see Table 1).

  11. Table 1: Share in Total Loans and Advances (%), Dec 06 – Feb 08

  12. 5.0 Interest Rates5.1 Yields on Government Securities • Yield rates on Treasury bills declined • Weighted average Treasury bill rate 12.7%, end-March 2008 (12.9%, end-December 2007) (see Chart 3). • Increased demand for Government securities. • Bond rates increased • Weighted average bond rate 15.9%, March 2008 (15.6%, December 2007) • Continued foreign investor interest, especially in longer dated securities (see Chart 4).

  13. 16 9/23/2014

  14. 5.2 Commercial Banks Interest Rate • Lending rates continued to trend downwards • Average lending rate 24.3%, March 2008 (24.4%, December 2007). • Deposit rates increased • 30-day deposit rate for over K20 million 5.0%, March 2008 (4.8%, December 2007) • Average savings rate for over K100, 000 remained unchanged at 4.8%.

  15. 6.0 Foreign Exchange Rate • Kwacha appreciated against major foreign currencies. • By 4.2% to K3,675.36 against the US dollar; and • By 4.9% to K475.56 against the SAR. • Stronger supply of foreign exchange on the market, due to high copper prices in international markets; • Increased foreign investor participation in Government securities market due to reduction in interest rates in USA; and • General weakening of the US dollar in global markets due to on-going credit crisis. • Kwacha depreciated by 1.8% to K5,629.90 against Euro (see Chart 6).

  16. 7.0 Balance of Payments • Overall BoP surplus of US $164.8 million in quarter 1 of 2008 (US $60.6 million surplus, Quarter 4 of 2007). • Improvements in capital and financial accounts due to increase in financial inflows in form of capital transfers and other investments.

  17. 7.0 Balance of Payments Cont… • Trade surplus of US $288.3 million ( US $115.7 million surplus, 4th quarter 2007) • Increase in copper (3.2%) and cobalt earnings (36.9%). • Copper export earnings at US $886.0 million (US $858.4 million, 4th quarter 2007) • Higher realised LME prices at US $7,746.94 per ton (US $6,949.22 per ton, 4th quarter). • Cobalt export earnings at US $108.3 million (US $79.1 million, 4th quarter, • Increase in realised price to US $42.37 per pound from US $28.76 per pound (see Charts 7 & 8).

  18. Chart 7: Export Earnings (US $ Millions) 23 9/23/2014

  19. 7.0 Balance of Payments Cont… • NTEs 16.1% decline to US $183.6 million in Q1 2008 • Lower export earnings of copper wire, white spoon sugar, burley tobacco, cotton lint, electric cables, fresh flowers and gemstones (see Table 2). • However, NTEs were 5.6% higher compared to Q1 2007. • Merchandise imports 8.8% decline to US $901.1 million in Q1 2008 • Lower import bills of iron & steel products, petroleum products, fertiliser, industrial boilers & equipment and electrical machinery & equipment.

  20. Chart 8: Movement in the LME Copper Price

  21. Table 2: Non-Traditional Exports (US $ Million)

  22. 8.0 Copper and Cobalt Output • Copper output 8.9% decline to 128,592.7 mt in Q1 2008 (see Chart 9). • Flooding of mines, typical in rain season. • But output higher than 114,912.7 mt recorded in Q1 2007. • Cobalt output 8.2% decline to 1,150.2 mt. • But, 26.9% higher than 906.5 mt produced in Q1 2007.

  23. 9.0 Implementation of the Economic Programme • IMF Mission visit to Zambia in Q1 2008. • Article IV consultations; and • Discussions on new economic programme. PRGF arrangement ended September 2007. • Understanding reached on new three-year economic programme under PRGF.

  24. 10.0 Developments in Banking Sector • Overall financial condition and performance of banking sector in Q1 2008- satisfactory. • Maintained adequate capital & reserves; and • Asset quality, earnings and liquidity- satisfactory.

  25. 11.0 Developments in Non-Bank Financial Sector • Overall financial condition and performance of NBFIs in review period- satisfactory. • Leasing companies, MFIs and bureaux de change- adequate regulatory capital. • One leasing company and one building society recorded regulatory capital deficiencies. • However, measures have been put in place to address the deficiencies.

  26. 12.0 Banking, Currency and Payment Systems • Currency in circulation, 7.0% decrease to K1,408.4 billion (K1,514.9 billion, end-December 2007). • Lower demand for cash in Q1. Q4 demand for cash usually higher due to festive season

  27. 12.1 Removal of unfit paper and polymer banknotes from circulation • Unfit banknotes removed amounted to 20.3 million pieces (21.5 million pieces, Q4 of 2007). • Public exchange of mutilated banknotes amounted to 11,984 pieces (9,779 pieces, Q4 2007). • Notes burnt by fire or eaten by rats. • The public is encouraged to deposit excess cash with commercial banks.

  28. 12.2Implementation of Item Value Limits • Item Value Limits implementation has reduced dependency on cheques and DDACC in transfer of funds and payments for large value and urgenttransactions. • However, some customers have in some cases split the amount and drawn more than one cheque to the same beneficiary. • The Public encouraged to utilise RTGS for transmission of large value transactions.

  29. 12.3Implementation of Tax Payment Stream • Implementation of Tax payment stream has enabled tax payers to make payments through commercial banks on any day before the deadline. • Queues at ZRA offices greatly reduced. • Some corporate tax payers with appropriate infrastructure can issue tax payment instructions from their offices. • Public to embrace this payment stream for all their tax payment obligations.

  30. 13.0 Inflation Outlook for the Second Quarter of 2008 • Overall annual inflation to slow down in Q2 2008. • Easing of both food and non-food inflationary pressures. • Lower food prices • Improved seasonal supply.

  31. 13.0 Inflation Outlook for the Second Quarter of 2008 (cont.) • Lower non-food inflation • pass-through effects of appreciation of Kwacha against major currencies; and • Reduction in VAT to 16.0% effective 1 April 2008 (from 17.5%).

  32. 14.0 Conclusion • The Bank of Zambia will continue to monitor these developments and undertake appropriate monetary policy actions. • Thank You

More Related