Caleb M Fundanga: Review of Zambia’s economy Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia Association of Manufacturer’s Annual General Meeting, Lusaka, 16 April 2010. *  *  *  The President of ZAM – Mr Chance Kabaghe The Vice Presidents (North and South) – Mr Sebastian Kopulande and Mr Eugen Appel The ZAM Executive Committee Captains of Industry Ladies and Gentlemen I feel greatly honoured to officiate at this Annual General Meeting for the Zambia Association of Manufacturers (ZAM). The Bank of Zambia and the Zambia Association of Manufacturers have a long standing relationship which is intertwined in more ways than one. I am sure that without making appropriate policies to support key sectors such as manufacturing, we would be robbing the country of the development that it deserves. I am reliably informed that ZAM has been going through restructuring in the last two years and has achieved a lot in terms of the establishment and making itself relevant not only to its members but to the Government and other stakeholders. It therefore gives me pleasure to stand before you to discuss issues that are pertinent to manufacturing. I am hopeful we will be able to understand the challenges and identify plausible ways of overcoming them for the sector to forge ahead and make a meaningful contribution to the economy. Mr President, the performance of the Zambian economy in 2009 was favourable.
There is also firm evidence that the inflation targeting regime has earned credibility in the markets and the community. The monetary regime will be further tested in the period ahead, which will among other things be characterised by an exceptional level of foreign direct investment in the aluminium industry and associated publicly owned and debt financed power plants. Our experience is a strong indication that inflation targeting is a policy which can be pursued in a very small and open economy as in a large economy with very deep financial markets. This policy is resource-demanding and imposes by necessity a very strong discipline on the respective central bank. In our view the increased focus on financial stability in the Central Bank Act of 2001 was natural and well within the accepted framework of central bank activities. The Bank was responsible for banking supervision until the end of 1998 when that function was merged with the Insurance Supervisory Authority in a new and unified Financial Supervisory Authority, with which the Central Bank cooperates quite closely on financial stability issues. While the Central Bank had responsibility for banking supervision, its attention was necessarily focused on individual institutions and overseeing that their operations complied with existing laws and regulations. Before banking supervision was transferred elsewhere, the Central Bank had also begun to focus its attention on broader financial stability issues along the lines that many other central banks were doing at that time.