Fri, 23 Feb 2018 08:57:31 +0000
By BUUMBA CHIMBULU
INTEREST rates on all loans linked to the monetary policy rate are expected to scale down by 50 basis points following the Bank of Zambia’s decision to cut lending rates for the fifth consecutive time, to the lowest in four years.
And First National Bank (FNB) Zambia expects the development to stabilise the Kwacha and increase liquidity in the market.
On Wednesday this week, the central bank reduced the monetary policy rate by 50 basis points to 9.75 percent from 10.25 percent and the Statutory Reserve Ratio by 300 basis points to 5.0 percent from 8.0 percent.
Commenting on the development, the Bankers Association of Zambia (BAZ) said with the pumping in of more liquidity into the market through the reduction in the Statutory, the cost of funds was expected to significantly reduce. BAZ public relations officer, Mirriam Zimba, explained that the development would have an impact on the pricing of loans and the market rates for risk free interest rates on Government securities while resulting in increased availability of liquidity.
“As the unwinding of monetary policies take full effect and macro-economic fundamentals stabilize, banks shall continue to provide the much needed support to the real economy at more affordable rates, “With these measures put in place by the central bank, commercial Banks will now start unwinding interest rates and scale up credit extension to support productive sectors of the economy,” Ms. Zimba said.
Meanwhile, FNB Zambia Chief Executive Officer, Leonard Haynes, said the reduction in the cost of money sent a strong signal to the business community on the performance of the economy. Mr. Haynes explained that development was expected to stabilise the Kwacha.
“The cash reserves requirements was a bit of a surprise to us , in previous discussion with BoZ we have sort of agreed with the governor that 8 percent was the right number , I do not know if this is in reaction to some of the pronouncement of the International Monetary Fund,
“It certainly sends a very strong message in the economy and it increases banks liquidity and therefore puts more money in the market and further support the rates to reduce because it is a supply and demand situation,” he said.