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Bankers signal reduction in interest rates

TRYNESS TEMBO, Lusaka
THE Bankers Association of Zambia (BAZ) says commercial banks will start reviewing interest rates and increase credit support to productive sectors of the economy following the reduction in the monetary policy rate and statutory reserve ratio by the Bank of Zambia (BoZ).
On Wednesday, the central bank announced a reduction in the monetary policy rate from 15.5 percent to 14 percent and the statutory reserve ratio to 15.5 percent from 18 percent.
BAZ public relations officer Mirriam Zimba said in response to a press query that the measures are a continuation of the quantitative easing methods which BoZ started in November 2016, which have greatly improved market liquidity.
“BAZ welcomes the decision by the central bank through the monetary policy committee of unwinding liquidity through the reduction of the statutory reserve ratio and monetary policy rate,” she said.
Ms Zimba said these measures will undoubtedly set the pace in reducing the cost of funding for commercial banks in view of the additional liquidity that has been placed into circulation.
She also said with copper prices on the rebound, inflation rate dropping, the agriculture sector promising a good harvest and stability of the Kwacha in the past one year, the country might witness a reduction in lending rates by commercial banks in tandem with the monetary policy decision.
Meanwhile, Ms Zimba said BAZ is optimistic that Government will execute the 2017 national budget within its resource envelope.
“The association is also positive that Government will execute the 2017 national budget within its resource envelope as they implement their fiscal consolidation measures which with the announced monetary policy measures will work towards reducing the risk-free rates on Government Bonds and treasury bills, which have an overall impact on the lending rates by commercial banks,” she said.
Over the medium term, economic growth prospects are expected to improve with GDP growth for 2017 and 2018 forecast at 3.9 percent and 4.6, respectively.
The central bank says it will continue to strengthen the forward-looking monetary policy framework anchored on interest as the key signal for monetary policy.

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