By Fred M’membe
The Bank of Zambia’s decision to increase the Statutory Reserve Ratios (SRR) applicable on commercial banks’ kwacha and foreign currency deposits liabilities to 9 per cent from the current level of 5 per cent is a desperate measure to curb inflation.
We have a brilliant team of very good economists at the Bank of Zambia but they have been stretched to the utmost. They are being pushed to do the impossible, to square a circle.
The measures the Bank of Zambia is taking will help secure financing for government and channels funds into financing the budget deficit.
However, this will lead to contracted lending in the open market due to reduced liquidity. It will also raise the cost of funds, which will further lead to an increase in interest rates and cost of borrowing.
Most banks are likely to reduce lending to meet these increased statutory reserve requirements.
Ultimately, it’s the borrowers who will bear the increased cost of funds.
Clearly, these are desperate measures.
And these desperate measures remind us of Shakespeare’s works. Those who think Shakespeare’s works are useless, outdated and shouldn’t be taught in school should think twice. In our opinion, Shakespeare’s works, particularly ‘Romeo and Juliet’, provide extensive insight into human behaviour.
The story provides a good lesson about the consequences of desperate behaviour, which can help us make the right choices in our governance, in our own lives.
So what does Shakespeare teach us? What is clear from ‘Romeo and Juliet’ is that desperation gives us irrational thought processes which usually have a potential for severe consequences. I’m sure you have heard someone say: “desperate times call for desperate measures”, a phrase which explains the sometimes detrimental result of decision making while in an irrational state.
If we could write a letter to Shakespeare, we would thank him for his timeless insight into the human psyche.
Desperate measures can be destructive. Some leaders become desperate when they are losing, and out of options. Leaders in desperation grasp at anything they think might ‘rescue’ them. We have plenty of examples today.
Desperate measures are born out of fear, fear that they are actually not performing well.
Actions taken out of desperation and hopelessness are unlikely to work: it’s that simple.
Desperate times call for bold measures but not desperate measures.
Decisions made out of hopelessness or despair are likely to turn out bad. It can create much larger problems.
As we have repeatedly advised, what is required is confidence building, addressing the many unresolved issues facing our country today.