Social Economist and Marketer Kelvin Chisanga says the Bank of Zambia‘s recent decision to maintain the monetary policy rate at 9% was inevitable.
The Bank of Zambia recently kept its benchmark interest rate unchanged on expectations that inflation will continue slowing and to support a fragile economic recovery.
When announcing the decision, BOZ Governor Denny Kalyalya told a media briefing in Lusaka that the monetary policy committee held the rate at 9%.
Speaking to Lusaka Times, Mr. Chisanga said raising the policy rate would have suffocated the credit market for businesses and lowered it.
He, however, stated that BOZ’s decision will come with a cost to the private sector owing to high lending rates in the commercial banks sector.
“Fiscal energies, inflation developments made BOZ to stay course policy rate at 9.0%! The performance of interbank encircled to the policy rate with this positive change coupled with inflation movements which have both edged to this directional route. Zambia’s apex bank has maintained its course in the policy rate at 9.0% considering the patterns and implications that we are all seeing from inflation development, as the inflation has given a positive shape following a number of other key factors such as improvement in fiscal policy. Raising the Policy rate would have meant that the bank would have suffocated the credit market for businesses and lowering it would mean that it would be taking a different twist against bringing down the inflation towards the target range,” Mr. Chisanga observed.
“The policy decision however arises with no big surprise at all more especially at this point, as I predicted on the same through various local media, on the back of concerns raised by observing many macroeconomic factors placing it to stay the course on the November rate where it has been after hiking it by a 50 basis points in late 2021.It is imperative to state that headline inflation has continued to linger just slightly above the upper band of the medium-term target of 6 – 8% with expectations to see it hovering around the target horizon, it is also well recognizant to further state that the policy rate has shown some relatively positive signs of making “heavy marks” on the economic front with a very little impact counteracting against the growth seen in both population and economic growth,” he said.
Mr. Chisanga acknowledged that lending rates among commercial banks operating in the country have remained high.
“It is well rewarding to say that average lending rates of commercial banks still remain high at more than pegged interest rate percentage, a situation that has twisted out a number of stories right into a blame-game among many stakeholders. In the private sector’s eyes, banks are just seen profiteering from their customers by smacking a serious toll on interest rates for bankable services and solutions such as loans, overdrafts, guarantee, etc. As the case may be, the banks always cry foul to stipulate on the blame that lending rates are high due to the policy rate band coupled with the risk factors associated with, especially going by lending out liquidity to the private sector,” he said.
Mr. Chisanga maintained that primary and secondary sectors of the economy must improve to improve the outlook of the local economy.
“And to this end, we need primary and secondary sectors of the economy to give edge to this path of growth otherwise we have seen tertiary services performing very well though we can’t grow the local economy with this trend, so we need primary activities such as manufacturing thereby driving diversifications of export. As the policy measures take this direction, the decision of the MPC, though seem to be quite justifiable and fairly reasonable, will still come through with a cost to the private sector which has always remained a high card on the lending rates with the commercial banks in the country,” he said.
As long as Government continues to mop up all funds in Treasury Bills the trend will remain the same
Meanwhile hh is sending acc to harrass innocent old people like my father chikwanda who suffered stroke. Should he die his blood is on hh. Remember he is royalty and if you kill royalty you will die like a chicken. Lobe
The policy rate of 9 percent could be fine, but the interest rates that even go as high as 46% are so exorbitant that borrowers are heavily exploited. Money is so scarce and the risk of lending is very high.
The marginal 1.3% drop in inflation the media recently reported may perhaps reduce the cost of money.
In the short-term Gov participation in Treasury auctions is a good thing it doesn’t crowd out the private unless its done for a long-term and without focus what you need to do is to work the sectors in fiscal measures and use MPCs to smoothen leading progressive indicators foster the whole asset allocation in credit The banking and effeciencies in transmission around asset classes to effect policy measures must be seen in correlation and mispricing Yes the policy rate maintenance at 9% was okay in the short-term but going forward it must be supported by productivity The nature of our banks in modelling this must change because there is often very little correlation in asset classes locally and response look at the spreads for Bills and bonds see the risk premium and agree with the…
Any tick movements and not basis point up or down in durations is massive flow of funds into or out f the particular asset classes SECTORIAL and regional so 9% as opposed to known 9.5% is massive redirection but given uncertainties 1/4 movement could also have been within but the Inflation measures as in other posts now must e accurate and more so productivity to up the 3.5% to 4% okay
Ministry of Finance and the Bank of Zambia is being lead by AMATEURS. No idea of finance matters. That’s why private banks get away with their MURDEROUS interest rates. In REAL countries the REAL governments decide what interest rates can be used, but NOT in Zambia. Shame!
And stup!d KZ’s father is royalty? Yes, sure! Just like the sole of my worn out shoes is royalty! Kikikikiki……
Culture of paying back is very weak here plus there is not enough money to go so lenders have to keep high interest rates to cover up for defaulters.
It’s not further than Truth we have excellent individuals with proper monetary Stratergic plans There MPC setting environments meets the minimum requirements in capital and financial flows risk management They hod discussions and discuss the rationale and reasoning and in this case the stance here what is needed is to continue with financial literacy and financial depening programmes including restructuring to promote trades and effeciency in Assets and products They have achieved the most yet more can be done
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