caleb m fundanga : growth and development of the zambian economy opening remarks by dr caleb m fundanga, governor of the bank of zambia, at the official opening of the standard chartered bank plc, livingstone, 7 january 2009. * * * the deputy minister of southern province, hon daniel munkombwe ; the standard chartered bank – acting managing director, mr. robin bairstow members of the press ; distinguished guests ; ladies and gentlemen allow me to begin by thanking mr bairstow and his colleagues for inviting me to this occasion which marks the official opening of the standard chartered bank plc, livingstone falls park agency. i congratulate standard chartered bank plc for yet another milestone achievement. hon. minister, i have stated at various fora that it is important for banks in zambia to take actions which support the growth and development of our economy. we need banks to open new branches, such as this one, to increase the convenience for our people to access banking services ; thereby increasing the efficiency of our economy and empowering our citizens. in particular, i have been encouraging banks to expand their services to areas with vast economic potential like livingstone, which represents a win - win situation for both the bank and the city. i am glad that, although, standard chartered bank already has an established branch in livingstone, it has chosen to expand its services to other areas of the city in order to bring its products and services to the customer ’ s door step. this strategic move speaks louder than words and confirms that there are enormous opportunities here, which the bank can benefit from, despite the stiff competition in the market. ladies and gentlemen, another issue that the bank of zambia continues to challenge commercial banks on, is the cost of borrowing which continues to be high in spite of the efforts by the bank of zambia and the government in ensuring that these costs come down. as you are no doubt aware, the bank of zambia reduced the statutory reserve ratios from 14 % to 8 % in october, 2007 with a primary aim of bringing the cost of borrowing down. further, in the recent few years, the bank had managed to contain inflation to low levels in order to further reduce the lending rates. coupled with this, in the recent past, the government adopted prudent fiscal policies that enabled the private sector to access more credit from the financial system. despite these efforts, credit is still not affordable to the majority of our people. this high cost has in turn stifled the growth of the productive sector and in particular

of oil and petroleum products. attainment of a single digit inflation has been government ’ s goal for a long time. it is, therefore, pleasing to note that, in april 2006, annual inflation declined to 9. 4 %, the lowest rate in the last 30 years. this inflation outturn has been largely due to the conduct of appropriately tight monetary policy aided by prudent fiscal policy and the continued relative stability of the kwacha. with the anticipated bumper harvest of maize coming on the market as the marketing season opens this month, maize prices are expected to fall and assist in keeping food inflation in check and overall inflation at a single digit level. the challenge will be to anchor inflation at these single digit levels throughout this year and beyond. in order to do this, continued implementation of appropriate monetary and fiscal policies as well as maintaining relative stability of the exchange rate would be vital plus increased production of goods and services. ladies and gentlemen, recently, the exchange rate market has been characterized by a general appreciation of the kwacha against major foreign currencies. this has been mainly due to increased supply of foreign exchange on the market relative to demand. the key factors underlying the increased foreign exchange supply include : ii. increased copper output and exports as well as record high prices. copper exports volume has in recent year registered sustained growth, increasing from 353, 000 metric tons in 2003 to 423, 000 metric tons in 2005. the price of copper rose to us $ 4572. 0 per tonne in december 2005 from us $ 3134. 79 per tonne in december 2004. by may 19, 2006, the price of copper had increased to us $ 8016. 29 per tonne, iii. increased non - traditional export earnings, from us $ 410 million in 2003 to us $ 476. 7 million in 2005, iv. improved economic confidence following the attainment of the enhanced hipc initiative completion point in april 2005, which resulted in reduced external debt service obligations, and ; v. increased foreign direct and portfolio investment, reflecting increased market confidence in the economy stemming from the greatly improved prospects for the copper sector, the cancellation of the bulk of zambia ’ s external debt, and the continued commitment to prudent fiscal and monetary policies. mr chairman, all these factors have accounted for the current strengthening of the kwacha. this has led to an outcry from some of our exporters of nontraditional commodities that they are losing external competitiveness and