BOZ Quarterly Brief - Presentation (Q2 2009)

8/14/2019 BOZ Quarterly Brief - Presentation (Q2 2009)

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1.0 MONETARY POLICY

Focus: Achievement of end-year inflation

target of 10%.

Maintaining Reserve Money within programmed

growth path.

Bank of Zambia

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2.0 INFLATIONAnnual overall inflation was 14.4% in June

2009 (13.1%, end-March 2009), due to rise inboth food and non-food inflation:

Food: Discontinuation of supply of Governmentsubsidised maize by FRA to millers; and

Non-Food: Pass-through effects of depreciationof the Kwacha against global currencies .

Bank of Zambia

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2.0 INFLATION (contd)Bank of Zambia

-1

1

3

5

7

9

11

13

15

17

19

21

23

Dec04 Mar05

JunSept

Dec05 Mar06

Jun Sep

Dec06 Mar07 Jun07

Sep

Dec07 Mar08 Jun08 Sept

-08

Dec

-08

Mar

-09

Jun

-09

(%)

Annual Inflation, Dec 04- Jun 09

Overall Food Non-food

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3.0 MONEY SUPPLY & DOMESTIC

CREDIT

Annual M3 growth slowed down to 20.5% June 2009(26.8%, March 2009) due to fall in NDA (19.0%) andincrease in NFA (74.1%).

Annual domestic credit growth was 39.2% (52.7%,March 2009); growth owing to net lending toGovernment (141.5% increase).

Sectoral distribution of credit:

Personal loans category, highest recipient at24.9% of total loans (23.8%, Q1 2009), followed

by agriculture 17.5% (16.9%, Q1); manufacturing11.1% (10.8%, Q1).

Bank of Zambia

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4.0 INTEREST RATES

Yield Rates On Government Securities increase Weighted Average Treasury Bill Rate rose to 16.9% (16.7%, March

2009).

Weighted average yield rate on bonds rose to 18.8% (18.4%, March2009).

Commercial Banks Nominal Interest Rates rise All nominal rates rose, except Average Savings Rate at 4.8%;

Weighted average lending base rate rose to 22.4% (20.9%, March);

Average Lending Rate rose to 28.9% (27.0%) ; and

30-day deposit rate remained stable at 5.6% (5.1%).

BankofZambia

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5.0 FOREIGN EXCHANGE MARKET

The Kwacha marginally appreciated by 1% against theUS$ (9.3% depreciation, Q1) due to;

Reduced demand, especially from foreign financial

institutions;

Global economic recovery weakens risk aversion

Improved sentiments following increased forexearnings;

Rising international copper prices sincebeginning of 2009.

BankofZambia

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5.0 FOREIGN EXCHANGE MARKET (contd)

BankofZambia

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5.0 FOREIGN EXCHANGE MARKET (contd)

BankofZambia

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6.0 BALANCE OF PAYMENTS (BoP)

Overall BoP - surplus of US $24.9 million recorded in Q2

(deficit of US $147.7 million, Q1):

Due to improved performance in current account.

Largely explained by surplus in trade balance of US

$34.5 million in Q2 (US $60.8 million deficit, Q1) ;

Increase in export earnings.

Other contributions to current account improvement were

net income payments and net current transfers.

Bank of

Zambia

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6.0 BALANCE OF PAYMENTS (contd)

Trade Data in US $ millions (f.o.b.), Q1 2008 - Q2 2009

Bank of

Zambia

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Total

2009

Q1

2009

Q2*

Trade Balance 421.1 235.8 -183.9 -69.8 403.2 -60.8 34.5

Exports (c.i.f) 1,318.6 1,441.8 1,206.7 909.8

4,876.9

713.9

864.1

Metals 1,147.2 1,216.2 925.6 711.7 4,000.7 575.4 706.6

Copper 1,035.5 1,126.1 856.2 666.4 3,684.2 562.9 688.6

Cobalt 111.7 90.1 69.4 45.3 316.5 12.9 18.0

NTEs 171.4 225.6 281.1 198.1 876.2 138.1 157.5

Imports c.i.f -913.2 -1,225.9 -1,416.3 -999.9 -4,555.3 -668.3 -847.6

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6.0 BALANCE OF PAYMENTS

(contd)

Merchandise export earnings increased by 21.0% to US

US $ 864.1 million:

Copper export earnings, at US $688.6 million, were

22.3% higher than US $562.9 million;

19.4% rise in realised copper price to US

$4,045.66 per mt from US $3,389.42 per mt;

Volumes increased by 2.2% to 170,218.93 mt.

Bank of

Zambia

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Cobalt export earnings recorded a 39.2% increase to

US $18.0 million in the second quarter of 2009;

Realised cobalt price rose to US $12.97 per poundfrom US $5.03 per pound.

Cobalt export volumes declined by 46.0% to 628.51

mt.

Bank of

Zambia

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NTEs at US $157.5 million were 14.0% higher than US

$138.1 million realised in Q1:

Increased earnings from copper wire, cane

sugar, cotton yarn, fruits and vegetables,

gemstones, petroleum products and electricity.

Bank of

Zambia

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Merchandise imports also rose by 26.8% to US

$847.6 million (US $668.3 million, Q1):

Higher import bills of food items, petroleum products,

fertiliser, iron and steel products, industrial boilers and

equipment, and electrical machinery and equipment.

Bank of

Zambia

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The IMF completed 1st and 2nd reviews under PRGF

arrangement in Q2:

The Executive Board approved US $256.4 million

financial support to Zambia;

A total of US $162.2 million was disbursed in the periodunder review; and

All quantitative benchmarks were met at end-June andthe structural benchmarks were generally on track.

7.0 ECONOMIC REFORM

PROGRAMME

Bank of Zambia

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Overall financial performance and condition of the

banking sector was satisfactory in Q2;

Banks fundamentally sound; but

An increase in non-performing loans to 10.4% oftotal assets from 8.8% at end March.

8.0 DEVELOPMENTS IN BANKING

SECTORBank of Zambia

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Overall financial performance and condition of NBFIs

was rated fair during the Q2:

Adequate regulatory capital and asset quality for leasingcompanies and bureaux de change;

2 leasing finance companies, 1 building society and 1

credit and savings institution had regulatory capitaldeficiencies.

9.0 DEVELOPMENTS IN NON-

BANK

FINANCIAL INSTITUTIONSBank of Zambia

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Volume of unpaid cheques declined by 11% to 5,568

cheques (quarter 1: 6,264);

Value increased by 24% to K57 billion (quarter 1: K46billion).

The BoZ would like to urge the Media to educate the

public on the consequences of bouncing cheques.

10.0 DEVELOPMENTS IN BCPS

Bank of Zambia

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Inflationary pressures expected to emanate from: High production costs due to current power shortages and

recently approved increase in electricity tariffs; and

Higher international crude oil prices if sustained.

Offsetting factors: Reduction in food inflation due to ongoing crop marketing

season;

Continued stability in the exchange rate.

BoZ to continue to employ indirect instruments for

monetary operations,

Prudent fiscal operations necessary.

11.0 INFLATION OUTLOOK FOR

THIRD QUARTER 2009Bank of Zambia

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Thank You

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Documents

BOZ Quarterly Brief - Presentation (Q2 2009)