Although current demand conditions contain the second round effects of the supply shocks, the exact pace of disinflation would still depend on the extent new inflation targets serve as a strong reference for economic agents. Having this in mind, the CBT will continue to focus on enhancing the credibility of the new inflation targets. In this context, developments in the general pricing behavior and the underlying inflation trends will be monitored closely. International financial markets remain fragile and the credit conditions continue to tighten up. The eventual impact of the financial turmoil on the global economic activity is yet to be seen. Moreover, rising commodity prices continue to exert pressure on global inflation. These uncertainties have been dampening the risk appetite and thus slowing down the capital flows to emerging markets, leaving these economies susceptible to shifts in the market sentiment. Domestic uncertainties have exacerbated these effects, as manifested by the significant rise in the sovereign credit risk of Turkey in the first half of the year, compared to the average risk premium of emerging economies. The CBT will not display a sharp reaction to temporary fluctuations in the financial markets, unless there is a threat to the medium-term disinflation trend and/or a significant worsening in the general pricing behavior. Finally, I would like to state that our medium-term projections do not foresee any significant effect to be brought about by the increases in indirect taxes or administered price adjustments, except those required by the automatic pricing mechanisms.

Further, the Kwacha lost 0.5 percent against the euro, moving to an average of K6,025.64 per euro. •  The continued relative stability in the Kwacha vis-à-vis other currencies was partly explained by the well-functioning broad based interbank foreign exchange system, which has thus far led to an efficient flow of information in the foreign exchange market since its inception in July 2003. In addition, the fall in the value of merchandise imports, coupled with the rise in the value of exports during the month of January 2004, contributed to the observed relative stability in the foreign exchange market in February 2004. 2  BIS Review 27/2004  Real sector developments Agriculture •  As at 29th February 2004, the Food Reserve Agency (FRA) had purchased a cumulative total of 54,773.15 metric tonnes (mt) of maize compared with 54,598.57 metric tonnes (mt) of maize purchases at the end of January 2004. The highest amount purchased was from Eastern Province, 16,052.55 mt followed by 11,935.0 mt from Southern Province. The rest of the purchases were from Central (9,026.15 mt), Northern (8,824.75 mt), North-western (3,100.15 mt), Luapula (2,561.85 mt), Lusaka (2,381.50 mt), Western (498.80 mt) and Copperbelt (392.40 mt) provinces. •  As at 29th February 2004, major milling companies in the country had an estimated maize stock of 58,620.0 mt compared with 74,224.0 mt recorded at end-January 2004. Of this, Lusaka Province was holding 28,670.0 mt, Copperbelt (16,200.0 mt), Southern Province (6,650.0 mt), Central Province (6,000.0 mt), Northern Province (1,000.0 mt), and Eastern Province (1,000.0 mt).