Caleb M Fundanga: Media relations and the Bank of Zambia - a healthy
interaction
Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of
the Bank of Zambia 12th Media Seminar, Ndola, 5 October 2007.
* * *
• The Chairperson
• Distinguished Journalists
• Invited Participants
• Ladies and Gentlemen
On behalf of Bank of Zambia and indeed my own behalf, I am pleased to welcome you all, to
this Bank of Zambia sponsored annual seminar, which is the 13th in the series. Further, it is
also my great pleasure to welcome you to the City of Ndola.
Ladies and gentlemen, as it is normally the case, some of you are participating for the first
time. For those of you that are participating for the first time, let me inform you that this is
your seminar and I urge you to participate freely and effectively. I know that your friends who
have participated in the seminars before, will agree with me that, every year that we meet at
such a forum, we meet as "partners" and it is certainly in the interest, of not only us gathered
here but the nation at large that this spirit is exhibited through out this seminar, and beyond.
In fact, let me thank the media for having embraced this partnership and worked towards
maintaining it. The Bank of Zambia-Media relations have been quite healthy, partly due to
annual interaction through Media Seminars.
Let me reiterate facets of the media namely, education and information to which the Bank of
Zambia attaches a lot of importance, and forms the guiding principles for the formats of all
media seminars Organized by the Bank. We in the Bank believe that an effective or indeed a
well informed media is key in the country's development efforts. It is in this regard that the
Bank will continue to work towards the provision of quality information and/or education to
the media as evidenced by the continued holding of such seminars coupled with quarterly
media briefs. Such efforts as you may be aware are not for our own interests but the
Zambian stakeholders. This is as it should be.
Distinguished journalists; may I humbly urge you, to actively participate in the deliberations of
this seminar. Let me hasten to mention, particularly to those of you that are participating for
the first time that you may not be able to completely grasp the materials that will be
presented during the seminar. This must not discourage you, as you are free to make
followups with the respective departments (and indeed officers) at our offices in Lusaka and our
Regional Office here in Ndola. Nevertheless, I am confident that the respective presenters
will ensure clarity in their presentations and fully respond to any issues arising there-from.
Ladies and gentlemen, allow me, at this point in time to brief you on the performance of the
economy in 2006 and the period January - August 2007. As you may be aware, Zambia has
in the recent past recorded macroeconomic stability and growth in the economy, reflected in
low and falling inflation, relative stability in the Kwacha exchange rate, falling lending rates
and positive real GDP growth rates underpinned by strong private sector investment in all
growth or priority sectors. Further, the financial sector has been stable, and continues to post
growth.
In 2006, the performance of the Zambian economy continued to be encouraging as it
registered a positive growth of 6.2% in real GDP, marking the eighth consecutive year of
positive real growth. You will note that over the period 2001-2006 growth in real national
output averaged 5.0% per annum and was above the average population growth over the
same period, while inflation declined to 8.2% in December 2006 from 15.9% in December
2005.
Distinguished journalists, it is worth-mentioning that the growth, which has been broad-based
has extended beyond the recovery of the mining sector and shown resilience to adverse
shocks, such as droughts and record increases in oil prices, Agriculture, construction,
transport and communications, and tourism sectors have been the other key contributors to
the sustained increase in economic activity.
A lot of progress continue to be made on the inflation front, as shown in September 2007,
when inflation declined to 9.3% despite having risen to 12.7% in March. Continued
implementation of prudent monetary and fiscal policies, fairly favourable developments in the
exchange rate coupled with pro-growth and pro-poor agricultural policies that have led to an
increase in food supply and subsequent improvement in the country's food security largely
explain the favourable developments in inflation. For instance, the country recorded an
increase in maize surplus to 250,000 metric tons (mt) this consumption period from 160,000
mt during the 2006/2007 consumption period.
With respect to the money market, given lower inflation and yield rates on Government
securities, commercial banks lending rates have been on the downward path. This can be
illustrated by the nominal average lending rates which declined to around 28% in December
2006 from about 34% in December 2005, and further fell to 24.3% in September 2007. This
is consistent with Government's desire of making more funds available for priority sectors of
our economy at reasonable cost, in line with the objectives the Fifth National Development
Plan, 2006-2010. Ladies and gentlemen, testimony to this was the recent lowering of the
statutory reserve ratio by the Bank of Zambia to 8% from 14% effective 1st October 2007.
We expect this action, will release more funds to the commercial banks for on-ward lending
to the priority sectors. Availability of investible funds to sectors such as agriculture,
manufacturing, tourism and mining will stimulate further growth in the economy, create more
employment and incomes, and contribute to alleviation of poverty. However, it must be noted
that the economy desires much lower lending rates than so far recorded to make credit
affordable and effectively contribute to expansion of economic activity.
The external sector has continued to score remarkable improvement as lately reflected in a
the resilience of the Kwacha against major foreign currencies, and the country posting in
2006, an estimated overall balance of payments surplus of US $696 million compared with a
deficit of US $284 million in 2005. For instance, the Kwacha appreciated by 12.0% against
the US dollar while the local currency gained by 10.4% against the South African Rand
during the period end-December 2006 to 21st September 2007. This improvement largely
occurred due to increased export, which mainly arose from continued high copper prices and
complimentary higher export volumes coupled with the buoyant growth in non-traditional
export earnings. The maintenance of an appropriate monetary policy, in the wake of a higher
than expected inflation outcome in the first quarter of the year, also contributed to the
resilience of the Kwacha. The developments in the Kwacha should not only enhance
competitiveness of the country's exports, particularly the non-traditional exports but should
overall have a positive bearing on inflation developments in the coming months.
Esteemed colleagues, the financial sector has continued to enjoy stability and growth this
year, characterised by improved banking services and emergence of new products. The
overall financial condition and performance of the banking sector has been assessed as
satisfactory. The performance of the non-bank financial institutions has todate been fair as
the Bank of Zambia continues to implement measures aimed at maintaining and enhancing
the soundness of the financial system.
Chairperson; when we met last year at Fringilla in Chisamba, I informed the participants to
the 12th Media Seminar that further expansion in the banking sector was eminent, as some
commercial banks had plans to re-open or indeed open more branches across the country,
this has come to reality as most of you have seen the establishment of new branches by
several banks. These developments are undoubtably a manifestation of the improving
investment environment arising from consistent macroeconomic reforms reflected in
enhanced macroeconomic stability. We have also continued to received inquiries from
foreign banks that want to establish operations in our country.
Under the Financial Sector Development Plan, implementation of activities has continued key
among them being:
a) Sovereign rating for Zambia
The process of obtaining a sovereign rating for Zambia, being spearheaded by Government
has made appreciable progress, with the completion of the Terms of Reference for the
provision of advisory services and subsequent submission of Cabinet Memorandum for
approval. The Sovereign rating is expected to compliment other government initiatives to
promote foreign investment in the Zambian private sector and stimulate the development of
domestic capital markets and investment by Zambians.
b) Credit Reference Law and Services
Following the issuance of the Credit Reference Services (Licensing) Guidelines and the
Credit Data (Privacy) Code, the Bank of Zambia has drafted the Credit Reference Law. The
draft law is currently undergoing legal review and is expected to be effected in the course of
next year. Meanwhile, the licensed credit reference bureau - Credit Reference Bureau Africa
Limited (CRBAL) has not yet commenced operations as some commercial banks are yet to
provide the required data to the CRBAL.
c) The National Payment Systems Law
The National Payment Systems Law has been enacted and became effective on 15 June
2007. The Law is intended to mitigate the shortcomings that were in the legal framework and
provide legal backing to international best practices in the payment systems.
To all of you gathered here, I would like to implore you, not to only inform the public about
these and other developments but to interpret what these mean to ordinary Zambians. It is
only when ordinary Zambians, who are the key stakeholders, have an unquestionable
understanding of these developments that they shall fully support our developmental policies
and strategies.
Ladies and gentlemen, allow me to remind you that our quest for development will in no
doubt be without challenges. The continued higher and unstable international oil prices
poses one of the strong challenges to our targeted growth of 7% this year and end year
inflation of 9%. Another challenge, ladies and gentlemen, to a growing economy such as
ours is the need to ensure availability of growth-supporting infrastructure. Inclusive of these
are good trunk and feeder roads, communication facilities and sufficient and affordable
energy supply, particularly electricity. Furthermore, current regional integration initiatives
coupled with globalization, in part entail that Zambia has to appropriately re-position itself in
the region. This will be with a view to create greater opportunities for expanded trade in the
region and international markets as well as empowering the local business players.
These and other challenges are for all of us as partners, to tackle by playing our respective
roles with the aim of achieving stronger economic growth rates that will have a notable
bearing on improving the standards of living of our people.
Chairperson, as per the usual tradition, the topics for this Seminar, have been carefully
selected aimed at not only educating and informing but also sharing views. Please as you
discuss, you are encouraged to be broad not to confine your contribution to the topics
presented you. We will welcome views on various issues within the Bank's mandate. You are
further encouraged to interact with members of staff outside the Seminar sessions.
Let me again pay tribute to the Media for the interest it has shown and subsequent active
role it has continued to play in the economic affairs of our country and in particular matters
related to the mandate and functions of the Bank of Zambia. Let us continue as partners and
provide checks and balances to each other for the good of our people.
Let me, once again, welcome you to this Media Seminar and declare the Seminar officially
open.
I thank you for your attention.