BOZ embarks on expansionary monetary policy path
By Staff Reporter
Bank Of Zambia (BOZ) has embarked on an expansionary monetary policy path this year, cutting rates aggressively to trigger desired growth rate for the nation.
And BOZ Governor Denny Kalyalya says the monetary policy has been lowered by 75 basis points (bps) to 10.25% from 11.0% and reduced the Statutory Reserve Ratio account by 150bps.
In a statement yesterday following two days of deliberations by the Monetary Policy Committee Kalyalya said that the rate cut will cumulatively bring the annual relaxation in benchmark interest rates to 525bps – from 15.5% to 10.25%.
“The President had in the quarter urged commercial banks to consider lowering rates to allow affordability of loans by citizens, Commercial Banks will be expected to adjust their lending rates by a minimum of 75% following the announcement”. he said
“Zambia is on a bullish growth path of 4.1% expected this year and one of the pivotal factors to aid it attain this has been the relaxed monetary policy. The Kwacha, however is trading for ZMW10.1/USD as at the time of the announcement,” Kalyalya said.
He added that the Bank of Zambia has further announced that the statutory reserve ratio is now at 8%, down from 9.5% and this is expected to free up more funds to the banking sector for onward lending to the Zambian market.
“A reduction in the policy rates means that there is a potential to alter short term interest rates in an economy, thereby influencing a level of economic growth.” he started.
Kalyalya stated that the decision of lowering the rates took into account the annual overall inflation that declined to 6.6% at the end of the third quarter with a continued improvement in economic activity.
Kalyalya cited the escalated level of credit impairments in the industry breaching the prudential limit of 10% and the need for private sector growth stimulation.
The Central Bank had earlier in 2015 December tightened monetary policy 300bps to 15.5% to curb currency slide but however realized that it penalized the private sector growth prospects.
