Bank of Zambia has slashed its reserve ratios on Tuesday to cut the cost of borrowing for commercial banks and consumers in a bid to stimulate economic growth in Africa’s biggest copper producer.
The Bank of Zambia (BoZ) said the reserve ratio for both local and foreign currency deposits would be 5.0 percent from 8 percent previously, while the core liquid assets ratio would go down to 6 percent from 9 percent.
The bank also said it would continue to work towards introducing a policy rate as a benchmark for determining interest rates.
Since his surprise election in September, President Michael Sata has made it clear he wants to cut the cost of credit to bring more Zambians into the economy, although investors have worried it could lead to higher inflation.
The BoZ said the cut in reserve limits should inject 700 billion Zambian kwacha ($142 million) into the banking system, but analysts said it was not overly aggressive easing given that the original 8 percent was high by African standards.
For instance, Kenya’s central bank said on Tuesday it was raising its cash reserve ratio by 50 basis points to 5.25 percent from Dec. 12 as part of an concerted effort to control runaway inflation.
“We know that they want to reduce bank lending rates, and when you have a very high cash reserve ratio, it does add to the cost of doing business,” said Leon Myburgh, an Africa analyst at Citibank in Johannesburg.
[Reuters]
Its a wise descision. We just had an interest rate cut in this very advanced economy from 4.75% to 4.50% because China’s economy is slowing down now so this should help counter inflation and boost internal production so we may have to ride out a possible global down turn again and come out as the best economy again.
That should help Zambians borrow to invest and be able to repay without defaults. All the best Zambia
Fake how many zedians will benefit apart from the banks themselves?
Good moves, no need to criticise without thought.
@#2 and others who might decide to post nnsense: This is a specialised topic. If you don’t know much about economics or banking (like me) please let our brothers and sisters who are conversant with the subject discuss it, and learn from them, whether they support or oppose. Asking how many Zambians will benefit is shallow. Those who do not benefit directly as investors will benefit in-directly from the increased economic activity, goods and services.
Bank of Bwafya!
There’s no board and there’s no govenor, who’s in charge at BOZ
However, the motivation was to help Mahtani to stabilise his bank with less government donation. In simple terms, to reduce the amount of money goverment will have to freely give to Mahtani.
Truly Brianless!!
MATHANI DON’T KUBEBA
how many zambians have access to substantial bank borrowing?
The interest rates from banks have been too high for a long time so I believe it is a move in the right direction
Lets leave those who understand the topic to educate us. whats your definition of substantial anyway? In any case lending is based on ones capacity to pay my boss…
A step in the right direction though I feel the most significant move would be to compel companies that are mainly into export business like the mines to bank at least 70% of their sales revenue in Zambia. that way the liquidity of the banks should go up in turn it will be easier for them to lend money at lower rates.
@zedian, that makes lots of sense, banks will be able to attract interests from large sums of banked monies by these companies there by increasing their liquidity and them unselfishly reducing lending to enable an average zambian do business who inturn will bank with the same banks.
I imagine most of us borrowing and setting up businesses and employing others, this will not only increase banks liquidity but also the tax base (being the governments main source of income) in Vat, PAYE, Provisional tax, name them. just by this i see much more sectors benefiting and reducing poverty of most country men.
ZAMBIA WE CAN
INDO AND BACLAYS: reduce your lending rates also.
Zambian banks(Invest and Finance) well done by leading the way – very patrotic act and we will also always support you.
At this rate if we can only reduce the cost of politics and energy,then ZED will be the new dynamo in the region no doubt.
Who gives a Fu@&*k,when foreigners are in charge of the economy,the rest of us Zedians are in the middle class.The money we are going to borrow will just be spent on consumer goods like cars and house goods,no real investment,thereby boosting the business of these foreigners.The repayments towards the loans only reduces our income thereby further impoverishing us!We shall forever remain enslaved to these foreigners,the real owners of the economy.
A lot of Zambians are borrowing and will benefit. If you are not borrowing don’t think others are not doing so. However note that indirect benefits will lag a bit behind before they are felt in the economy
Almost no effect on interest rates, on a weekly basis, the bigger banks in Zambia can hold even more than is required as statutory reserve holdings when it was at 8% previously.