BoZ cuts benchmark lending rate to 12.5 percent

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Bank of Zambia Governor Denny Kalyalya
Bank of Zambia Governor Denny Kalyalya

The cost of borrowing and servincing loans in Zambia has come down as Zambia’s Central Bank has cut its benchmark lending rate by 150 basis point to 12.5 percent.

Governor Denny Kalyalya cited lower inflation and subdued economic growth as underlining principles considered by the monetary policy committee.

“Among the principle reasons the monetary policy committee considered … is the continued decline in inflation,” he said.

Zambia’s inflation was flat at 6.7 percent year-on-year in April, the statistics office said last month, maintaining its steady decline from more than 20 percent a year ago.

This is likely to boast Small medium Enterprises and provide enough disposable income at the household level for those are who currently servicing loans.

The move is highly commendable as it will additionally cushion the impact of the electricity tarrif hike.

13 COMMENTS

  1. +1
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    Does this also affect loans that are already running? I remember sometime back, the banks increased the lending rate citing an increase in inflation.

    • +4
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      Yes it does, But our banks are a cartel. The banks have to date not passed the benefit of the last BoZ reduction to their borrowers. It is time that other financial intermediaries such Non Bank Financial Institutions and institutional investors such as pension funds (through special purpose vehicles) came to the party by lending at rates midway between the policy rate and the exorbitant bank rates. That way current borrowers can restructure the borrowing by paying off the expensive loans with cheaper ones.

    • +4
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      If foundation is weak no amount of jugglery works. Reduce rates will benefit banks and not the manufacturers. Low interest rates will enable speculators to borrow Kwacha convert into dollars and wait for devaluation directive of IMF and whoop, dollars will come back and Kwacha loan repaid.

      Inflation 6.7%? Joke of pre-Christ Pagans.

      Work on fundamentals, the topmost is enabling environment, start with freedom of speech, legal system and free and fair elections.

      Economy will follow.

  2. +3
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    12.5% is still too high for SMEs. It has to be a single digit rate for it to have a positive impact on economic growth. All of this is because our Central Bank is heavily controlled by IMF and other International monetary institutions. Mack my word, you’ll soon hear from IMF about this. Most likely the kwacha will be devalued.

    Bwana Governor, bring down the rate to a single digit if we have to see remarkable change.

  3. +5
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    Wow , we have 12.5% inflation rate and economic growth of just 3.4% meaning we’re inverted economically and the poor Zambian can’t get out of the poverty hole

    Revolution now or mass emigration out of PF’s forsaken banana republic are the two solutions.

  4. vote

    Good move by BOZ,I wish all financial institutions can make the right decision and reduce the cost of capital

  5. +1
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    The move is highly commendable as it will additionally cushion the impact of the electricity tarrif hike. This is the folly of the PF-fools.

    Interests rate policy is targeted at money supply. There is no excess supply of money in Zambia. The fundamental problem is cost push inflation like the hike of electricity tariffs and many ill advised and flawed policies. That said ,PF Fools are liars and trying to score points at every little opportunity. In short penny wise pound foolish.

  6. vote

    Google zambian economic outlook 2017 2020 by trading economics. Very interesting reading to see where we are and where we will be. Check the projected corruption index and our current account projections.

  7. vote

    Why is Barclays hestating to reduce loan rates or reducing the number of months owed to them by its clients. This is because when BOZ increased the lending rates Banks increased their lending interest rates may I get a clear explanation on this

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