LUSAKA, April 15 (Xinhuanet) -- The recent announcement by Oil Producing and Exporting Countries (OPEC) to cut world oil production by 4.0 percent will affect the Zambian economy during the second quarter of this year, the Bank of Zambia (BOZ) said on Thursday.

    "This may translate to an increase in transport and production costs in the economy as upward adjustments of wholesale price and ultimately, retail prices of petroleum products could lead to increases in prices," Danny Kalyalya, deputy governor of the central bank, told journalists during the monthly media briefing.

    The central bank official said the move will adversely affect production costs because petroleum products are inputs in most production processes and that this will contribute to a build up in inflationary pressures in the economy.

    While acknowledging the improvements of the economy during the first quarter of this year, the official noted that the move by OPEC countries as well as the tensions in the Middle East will likely push up the prices of oil on the world market. Zambia is not a producer of oil and the country currently imports its oil from the Middle East.

    Zambia has shown some overall improvements in the performance of the economy during the first quarter of the year attributed to the tight fiscal economic discipline the country has undertaken.

    According to the bank statistics, the commercial bank's interest rates have continued to go down while the foreign exchange market has remained relatively favorable due to control measures put in place by the government as it strives to reach theHighly Indebted Poor Countries (HIPC) completion point by June this year.

    "The government is expected to continue containing expenditureswithin the program (reaching HIPC completion point) as favorable fiscal performance is a key prerequisite for macroeconomic stability," he said. Enditem