Working paper 153
Caesar Cheelo and Marja Hinfelaar
This working paper analyses the role of Zambia’s central bank, the Bank of Zambia (BOZ), in delivering on its mandate, following banking reforms in the early 1990s. Despite occasional political pressures arising out of the competitive clientelist democracy, especially with regards to banking supervision and appointments of governors, BOZ has been able to deliver on its mandate and is regarded as a ‘pocket of effectiveness’. Its relatively independent position has been attributed to the conscious efforts of its top echelon to entrench BOZ’s autonomous position and work towards legislative independence in 2016. Besides changes in the legislative framework, BOZ’s countervailing powers were strengthened by the acknowledgement on the part of political leaders that the central bank acts as an important ‘signaller’ to international financial markets; a strong tradition of self-assessment; and an emphasis on public accountability. Historically, the BOZ governor plays an important role in defending BOZ’s mandate vis-à-vis the Executive, with the ability to stress the necessity for BOZ to abide by international and regional central banking standards. BOZ’s autonomy was briefly under threat in 2011. This transition coincided with a major political and ideological shift, which saw Patriotic Front (PF)’s short-lived attempt to confront conventional central banking policies. In this paper, BOZ’s effectiveness is measured in terms of price and financial stability and organisational and leadership capacities, traced in the context of Zambia’s changing political settlements.