External factors hamper price reduction in Zambia

LUSAKA, Aug. 3 (Chinese media) -- The Bank of Zambia has said high fuel and food prices are a major challenge to reducing inflation to single digit and advised the Zambian government to seriously look for alternative energy sources, according Sunday Times of Zambia.

Deputy governor of the central bank Denny Kalyalya said here Saturday that the global challenges regarding fuel and food prices were serious ones and that Zambia could take advantage of the food situation to increase food exports and earn more foreign exchange.

Generally the economy of the country remains on a positive path despite the external shocks, he said.

"The major challenge we are currently facing is to bring down inflation to reduced levels from the current 12.6 percent but external factors such as fuel and food prices are causing problems to reduce inflation, that is why it is important for the government to seriously consider diversifying energy sources," he said.

Director for economics of the bank Kellyford Nkalamo said credit to the private sector had grown significantly mainly in the agriculture, wholesale, retail and manufacturing sectors.

Over the last five years, the government has also reduced its borrowing from the banking sector, thereby reducing the crowding out of the private sector and contributing to downward movement in interest rates," he said.

With continued improvements in the macro-economic environment, investor confidence has increased, subsequently leading to increased foreign investment, he said.