NKOMBO KACHEMBA
Lusaka
BANK of Zambia Governor Denny Kalyalya says with the Monetary Policy Rate (MPR) declining, the fiscal deficit narrowing and fiscal consolidation firmly taking hold, the central bank sees no reason for bank lending rates to remain at their current levels.
And, indeed, some banks have started responding to the revised MPR by reducing interest rates linked to the policy rate.
Last Wednesday, the central bank cut the MPR by 75 basis points to 13.5 percent, citing a further decline in inflation in the fourth quarter of 2025.
Dr Kalyalya said while lending rates do not always adjust immediately in response to a cut in the policy rate, the prevailing macroeconomic conditions point to an inevitable downward adjustment.
The governor was responding to a question during the MPR brief on why some commercial banks do not immediately revise lending rates when the MPR is adjusted downwards.
He explained that although commercial banks typically revise rates linked directly to the policy rate soon after an announcement, broader average lending rates tend to take longer to respond.
“There are structural and operational considerations,” he said. “Banks cannot instantly reprice all loans without affecting their cash flows, as those loans were contracted based on projected returns.”
The governor noted that in the past, macroeconomic instability, high inflation and Zambia’s sovereign default in 2020 weighed heavily on the financial sector, limiting the speed at which lending rates could fall….https://enews.daily-mail.co.zm/welcome/home
