By VITA BANDA
ECONOMIST Kelvin Chisanga says the 3 percent Bank of Zambia statutory reserve ratio increment will cause a lot of market distortions.
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Mr Chisanga said despite the move to be a medium-term target on efforts to stabilise the Kwacha, the decision is coming at a huge cost to the domestic economy in many ways.
He said, this intervention by the central bank is expected to take out about K2.4 billion from the market.
Mr Chisanga said this is in as an aggressive policy measure on credit expansion, meaning that it will tighten liquidity conditions amidst low economic activities coupled with non-performing loans.
Mr Chisanga said, the move might be a good model to moderate the current economic effects but it will reduce liquidity in the economy.
“It seems a good model to moderate the current economic effects but it looks like we are tying money multiplier on the other side, a case that will be pretty much counterproductive especially when the economic wheels are almost slowing down,” he said.
He however said the increased statutory reserve ratio is coming with some complementary benefits of taming inflation, it will equally have some offsetting effects.
On Monday, the BOZ announced the increment of statutory reserve ratio by 3.0 basis points.
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