BoZ withdraws K625 million

THE Bank of Zambia (BoZ) was active in the open market operations (OMO) on Monday to mop out excess liquidity despite reduced money in circulation, financial market players say.

BoZ participated in the OMO, which is an activity by the central bank to take liquidity from a bank or a group of banks, and managed to withdraw a total of K625 million.

Financial analysts say the central bank is likely to continue to regulate the market to try and target inflation and interest rates after the statutory reserve ratio (SRR) was reduced to 9.5 percent.
Currently, inflation rate for August stood at 6.3 percent while interest rates are hovering at 27 percent.
“[The] SRR was reduced to 9.5 percent [from 12.5 percent]. We have a lot of money in circulation, excess liquidity, so the central bank is trying to balance inflation and interest rates,” a treasury said yesterday.
Zanaco also says, “With the central bank still active in the open market operations, the liquidity levels have continued to drop, closing at K747.56 million from the K825.99 million previously seen.
“BoZ, in its quest to mop out excess liquidity, was in the market both during the morning and afternoon sessions and managed to withdraw a total of K625 million and successful rates stood at 8.57 percent and 12.9 percent on overnight and seven days, respectively.”
The bank notes in daily treasury newsletter that the interbank is trading liquidity at 10.55 percent from 10.54 percent and the volume of traded funds stood at K158.50 million.
Similarly, First National Bank (FNB) observes that although liquidity in circulation has reduced drastically from over K1.5 billion last week to just over K740 million, the central bank has continued with its OMO.
In its daily newsletter, FNB says activity on the interbank has also reduced significantly as the weighted average interbank rate is currently at 10.55 percent.
Analysing the currency market, the bank is optimistic that the Kwacha will not breach the K9.30 on offer against the greenback.
On Monday, the currency market was fairly quiet on dollar/Kwacha front.
The unit traded within the K9.22/K9.27 range throughout the day, with a bias towards Kwacha weakness as demand for the greenback persists.
“Dollar supply remains scarce; however, given the nature of the market, things can change quickly and cause the currency pair to spike. The unit is expected to trade in the current range, but we do not expect the unit to trade above K9.30 on the offer,” FNB notes.


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