In Policy shift Zambia Central Bank Governor Fired

New Zambian President Michael Sata fired his respected central bank governor Caleb Fundanga on Thursday and his new mines minister floated plans to boost tax receipts from mining companies, rattling investors in Africa’s biggest copper producer.

But the appointments of Alexander Chikwanda, an economist with a long track record in government, as finance minister and Guy Scott as vice-president may calm fears of radical policy shifts under Sata, who was sworn in on Friday.

Fundanga, 58, was head of the Bank of Zambia since 2002, winning awards for his fight against inflation. His removal may signal the government wants lower interest rates and a weaker currency in Africa’s biggest copper producer, said Leon Myburgh, sub-Saharan Africa strategist for Citigroup Inc.

The election manifesto of Sata’s Patriotic Front “indicated they believe interest rates are too high and the currency is too strong,” Myburgh said in a phone interview today. “There is a distinct possibility that the monetary policy framework may change.”

Zambian currency (kwacha) fell as much as 2.5 percent to 4,890 against the dollar today and was trading at 4,855 as of 2:08 p.m. in the capital, Lusaka.

Zambia has kept inflation in single digits this year while larger African economies such as Nigeria and Kenya have struggled to curb the effects of higher food and fuel prices. The inflation rate fell to 8.3 percent in August from 9 percent in the previous month, the statistics office said on Aug. 25.

“With Sata coming into office, he wants his own people in the various institutions,” Yvonne Mhango, sub-Saharan Africa economist at Renaissance Capital in Johannesburg, said in a phone interview today. “The question is whether he just wants somebody leaning towards his party or whether he actually wants to influence monetary policy.”

Zambia’s economy has benefited after most of its debt was canceled in 2006 and copper prices climbed. The country received its first credit rating in March when Standard & Poor’s and Fitch Ratings assigned it B+, four steps below investment grade. The government had said it plans to sell a US$500 million Eurobond to help fund the construction of roads and power generation facilities.