The Bank of Zambia has announced that it would introduce a benchmark interest rate called the Bank of Zambia Policy Rate from the beginning of April.
According to the statement released to the media today by BOZ, it is expected that the standard policy of quoting loans and similar credit products by all Commercial banks will take the form of BOZ Policy rate plus the margin charged by commercial Banks.
The statement further said the first Policy Rate would be announced on March 29, and would come into effect on April 2, and would provide financial markets with a “credible and stable anchor for setting interest rates”.
“The increased reliance on interest rate policy-based instruments is expected to provide a relatively more transparent and efficient process through which the Bank of Zambia can better anchor inflation expectations,” it added.
Below is the full press statement.
Please le the market determine the interest rates! I thought we were in a free market economy, are we going back to the ‘old bad days” when the state had a hand in the economic fundamentals?
You may have missed the point. Study the USA, UK and other developed countries’ financial systems. Central banks set the base rates.
you will not eat free market economy, if all countries didnt have financial controls do you think they would be where they are?
central bank determines the interest in a given country.well done central bank n the reserve fund increase it for commercial banks to create condusive economical basis
This is a good move and for once we have a sound policy statement from this Govt. I wish we could have more of these.
#1 Kalusa, save your ignorance, this is economics 101 and if you don’t know much about economics, rather than rash to comments and expose your whatever, it is better to let expects comment first and follow their queue. This is standard procedure in most developed nations.
All banks effectively borrow money from the central bank and then lend it to you or each other and the rate BOZ is talking about is basically what they charge the banks and the banks pass it to you and put their margin on top.
It is that margin that the market will set. It is that margin where the competition will take place.
I like this because now we shall see who is the greedy one.
Iwe, makandi! No. 3 You don’t insult my intelligence. Is Zambia a developed economy? stupid *****!
Learn to appreciate, no. 3 has given a very good lecture for free. yes we shall see who is the greedy one
Iam missing something here.. I think Kalusa has a point,free markets here maybe be distorted by imposing maximum commercial interest rates.In the US,The FED does NOT impose commercial interest rates but influences them through Open Market Operations(the so called Funds rate or target rate) depending on the economic stuation obtaining on the ground.This Funds rate(target rate) is completely different from the Discount rate(which is the overnight lending rate by FED to commercial banks).Which one is it?
Mwalifishiba ayii? Ni chokako weka pabakulu.
This is a good move. Developed countries operate like that. In England the Bank of England does they same. They set the base interest rates, then banks and other financial institutions add a margin. In this way, it will be easier to compare rates.
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Through the target rate(which is not imposed),the Central bank can influence the interest rates by directly participating in the open Market (Buying and Selling of securities).If the Central Bank feels the target rate(the rate at which banks lend each other) is high and is passed on the consumers,it can actively buy securities hence effectively reducing the interbank lending rates and vice-versa.
Free market in the financial industry of zambia has favoured banks for too long; no wonder people end up paying 150% APR (add ka boza). Setting the base rate is a great move; we will see how much they charge.
#3: MMD Chief Booklicker, for the second time, I agree with you. After licking, ulakwata amano kanshi!!
Foolz think free market economy is to let everything happen. It is free, let shoprite import chickens also
Ukwanomics at play
Hey; if you are in doubt; read the communique from BOZ, therein you find reasons. Am very please with this because i can compare the cost of borrowing home and away.
dont comment if u kn nothing about economics.only us economists (THE REPORTER) Â understands the goodnes of this article above.good move.we gonna manage our economy
….when the banks start lending to prefered clients and turning away the ‘general public’, come to me…..
Stanbic Bank Bonus sharing needs Commission of Equery.
How can one manager get K500,000,000 K300,000,000 K200,000,000 and cleric staff get K5million only.
is this not corruption? what is corruption then. few are rooting while majority family suffering. we needs commission of equery here.
managers wives supplying food drink for the bank. i thoght musengule is in prison cause of this type of crime. are bankers exempted from prosequition.
please govt we are suffering here, come now. boz silent why now. too man foreigner staff why zambia. please help govt. managers commiting suicide stealingi k2.9Billion why. many staff on suspension why. many workers appearing in court why. somethig curruption please now help twapapata ba pf.
I cant find the clip on here either but if it helps in any way it was seaosn 2 episode 16 i think it was called Original songs, you might want to type that in the search bar. I hope it helps
When one understands the effects of price ceilings(in this case maximum rates chargeable)and other consequences of meddling with markets,s(he) will always defend free markets cos everyone is a winner including the govt.
Ba MMD Chief Bootlicker well said, I been following your contributions past days, you positively criticize and educate most of us than before……I am happy finally Zambia has a inflation target, cant wait to hear more about that. South African Reverse Bank works on the same policy…..inflation targeting…. I strongly believe Zambia can change for the better if we all participate in developing the country including opposition. I pray ZRA will strongly work in hand with BOZ…. export and import should all be accounted for to help the targeting as smuggling reduces our forex
Some chaps in the Diaspora are so dull and really an embarasment…Whats so difficult to understand here…Plz alittle research on the determinates of interest rate and inflation…. Simple economics..if u ignorant dont post…
AM AMAZED THAT ITS ONLY COMMERCIAL BANKS ! WHAT ABOUT TUNTEMBA BANKS ? IMAGINE BAYPORT GIVES YOU 10M AND CHARGES YOU 699,000*36MONTHS!
WANYA WANYA TATEKA ICHALO…
yah ! AAC and BANK of Zambia should explain what really goes on in financial market.Why is that those working for the mines are charged more than civil servants? FOR EXAMPLE :I got from BAYPORT k10m and told to pay k699000/month for 36months and my wife got same amount but was k417000 /month for 36months.
You credit ratings are different. Yours is worse than your wife’s. Simples.
#4 & #6 @Sharp Shooter I think you are being very technical about the workings of the banking system. The ordinary guy just wants to know how much his loan will cost him in terms of interest rate. The Central Bank base rate helps him to compare what the commercial banks are charging for their loans. #3 @MMD Chief Bootlicker explained simply for any one interested in borrowing money from a bank.
Will the president come back secretly from India the way he left?
icho muponena ama exams we are not discussing the president here, contribute to the topic not umulomo
@ Chief Bootlicker, Banks dont borrow money from the central bank. Dont mislead people. Infact the central bank will not lend out money. They sometimes control monetary policies by using open market operations (OMOs). Our central bank is not in the business of giving money to banks for their operation.
This is Dr. Gondwe the Bank Governor at work now, watchn this space, he is a professional who works behind the scenes and you will just be seeing results. This id indeed good fiscal policy, lets allow people ability to borrow money!!!!
ati fiscal policy……..he he he………….lol
I wonder if you understand any bit of this development or you are just being blown by the wind. This issue falls under monetary policy, my dear. Fiscal policy, talk of taxation (rates) and government expenditure.
Forget,free market economy,this is a more practical approach to monetary policy and control of inflation as a result.Atleast it won’t just allow banks to charge abnormal interest rates.However,the consumer should bear in mind that,these interest rates will keep changing every other sitting of the central bank monetary committee,either they can go down or they can keep going up depending on the economic performance.
@ Ras just google “repo rate,” “lender of last resort” and get some rudimentary understanding. The central bank lends to banks when they run out of cash to pay out depositors, etc. The central bank also lends money to the government through their “massive money printers” by buying government bonds, that’s where bernanke is getting his money to rescue US banks – computer entry, wham! $1 trillion in rescue funds!” This move on BOZ part depends on the independence, though. It is unprecedented in Zambian history to have quasi-independent institutions, I wonder if it will work. The other thing, what is the reserve bank mandate? The statement didn’t say what they will use to determine the rate – inflation, full employment?
@ Kamanga I appreciate your theory. Practically in Zambia, the central bank doesnt lend money to banks, they instead issue treasury bills on behalf of GRZ. Banks borrow money from other commercial banks at interbank lending rates. There is no financial crisis in Zambia for the central bank to start lending money to the banks.
23 RAS
Oh please, there we go again. How long shall I continue dishing out free lessons to people like you? Looks like even KK’s free education didn’t help.
In your grade 7 Social Studies or even Grade 8 CIVICS, don’t you remember coming across a question with the expression … Lender Of Last Resort.. and what answer did you use to put?
Awe mwe ..am tired ..somebody help me. Am off to read about what is now called Sata’s economic investment crusade in India ..something they roundly trashed RB for. Interesting times indeed.
@ Kamanga and Chief bootlicker Iam not talking about the theories you learnt in social studies, civics and economics but rather what is obtaining in the Zambia financial system. Practically in Zambia, the central bank doesnt lend money to banks, they instead issue treasury bills on behalf of GRZ. Banks borrow money from other commercial banks at interbank lending rates. There is no financial crisis in Zambia for the central bank to start lending money to the banks.
Number 28…A financial crisis is not required for the central bank to lend money to other banks. Its simply what the bank does when the other banks need more cash lets say for liquidity reasons or expansionary reasons. As for the bank setting a bench mark interest rate this is very good news. This will allow the bank to control the money supply in the economy thus ensuring stable prices and hopefully lower inflation a practice used by the major central banks such as the FED or Bank of England
#28 RAS, Bootlicker and Kamanga, I like your enlightened discussions. Iam no economist but would be interested to know what this BOZ policy rate would achieve. Can you please if you can, explain the mechanics, if indeed BOZ does not lend money to commercial banks in Zambia. What exactly is the purpose then of this rate if appraently, BOZ is quite different from the Federal Reserve and the Bank of England when it comes to controlling monetary and credit environments in the respective countries. Surely BOZ must know what they are trying to achieve.
Its a way of BOZ controlling the money supply in the economy. This is done to stop inflationary pressures coming about. As a result BOZ will now have to lend money to the commercial banks. My theory is that the days of banks lending money to each other might be confined to the past. BOZ wants to be the sole lender to other banks hence creating a monopoly.
Lusaka-Boy
That will be disaster…if the BOZ monopolises the interbanking lending business,then banking competition will be killed since their will be a monopoly by BOZ and the purpose of introducing this very policy will be defeated.And it not just inflationary pressures but also contractionary also as can be seen in credit(quantitaive) easing policies conducted by CBs.
Non ECONOMIST on ECONOMICS
Causes of inflation:1.Excess money printing, raises prices due to demand-pull.2.High production costs, resulting from raw materials, necessitating price hikes.3.Rising labor costs, causing companies to pass the back to consumers.4.Interest on International lending and debts raises prices in order to cope with debts.5.Steep drop of exchange rate, as the Government will have to deal with differences at import/export level.
On halting inflation,there`s no silver bullet. Measures are:1.Increasing bank interest rates, reduces borrowing, hence less money in circulation.2.Decrease in gov spending.3.Reducing consumer expenditure by increasing taxes or by reducing transfer payment.4.Gov can choose inaction and allow market forces to leverage, but this is a slow process.
Okay friends, there are certain things that are and we need to fully understand. This is a good move if it helps to create opportunities for people to create jobs. Benefits on such should be looked at tge ability of Zambians to spend and create more jobs. Other progressive third wotld and developing countries have been having governmnet policy rates for years and theyvhave stable economies
30.1(Lusaka-Boy)
That will be disaster…if the BOZ monopolises the interbanking lending business,then banking competition will be killed since their will be a monopoly by BOZ and the purpose of introducing this very policy will be defeated.And it not just inflationary pressures but also contractionary also as can be seen in credit(quantitaive) easing policies conducted by CBs.
School me bane! I am from remotest part of this beautiful country and I never went beyond grade 7. Don’t you think that whilst we are lauding the move by bank of Zambia to set benchmarks on interest rates charged there is a danger that we are slowly sliding towards a controlled economy? What happened to free market economics? I sincerely feel that the forces of supply and demand should be let to play their role and the Bank of Zambia should use other monetary instruments at its disposal to regulate the economic players. I say this because each bank has its own cost structures (supply side) and each prospective borrower has their benefit structures (demand side). I fear that this move by BOZ could lead to contraction in the economy. Inflation is NOT that much of an evil as is perceived.
This is the kind of Debate we ought to be having in parliament, not those ignorants always just asking if its in order or not questions. Am not an economist but i enjoyed the way you guys brought out that economics in you. I was able to see clearly who is ignorant and who is not.