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Address interest rate ceiling, State urged

BANKER’S Association of Zambia (BAZ) has called on Government to address the interest rate ceiling, which is hurting the low income population by limiting access to finance.
BAZ chief executive officer Leonard Mwanza said monetary tools that have capped lending rates and tightened liquidity through increased statutory reserve ratio (SRR) limits the financial sector’s capacity to grow and provide services to the masses.
Mr Mwanza said if ceilings are set too low, financial service providers find it difficult to recover costs, reduce service delivery in rural areas and may exit the market.
“The banking sector is of the view that monetary tools which have capped lending rates and tightened liquidity through the increased statutory reserve ratio (SRR) are inappropriate.
“Despite the good intentions, interest rate ceilings actually hurt low-income populations by limiting their access to finance. As an industry, we wish to encourage the Minister of Finance [Alexander Chikwanda] to follow through with the steps to address this imbalance through the fiscal space,” Mr Mwanza said in a statement issued yesterday.
He, however, commended Government for the removal of the 15 percent withholding tax on discounted interest on Government bonds, as this will bring back renewed interest from offshore players.
“Equally, the reduction of property transfer tax from 10 percent to five percent is a welcome move as it will make property prices on the market cheaper and increase the affordability of mortgages on the market,” he said.
He also said there is need for bold steps to ensure that the budget is kept within programmed levels.
However, Mr Chikwanda in his budget speech said Government is committed to limiting local borrowing to within 1.2 percent of the gross domestic product (GDP) and to scale down the current level of debt of K26 billion, a measure if properly aligned and implemented could bring down the high interest rates on Bonds and Treasury bills, which are currently close to commercial banks’ lending rates.