MOVE BY BANK OF ZAMBIA TO RAISE STATUTORY RESERVE RATIO CRITICIZED

0
1307
BANK OF ZAMBIA
BOZ

MOVE BY BANK OF ZAMBIA TO RAISE STATUTORY RESERVE RATIO CRITICIZED

By Balewa Zyuulu

Economist Trevor Hambayi has criticized the decision by the Bank of Zambia to raise the statutory reserve ratio by 3 percent, warning that this move could have a detrimental impact on the country’s economy.

The Bank of Zambia has issued a circular to commercial banks, notifying them that, effective November 13, 2023, the statutory reserve ratio will be raised by 3 percent on both local and foreign currency deposits, including government deposits and vostro account deposits.

Reacting to this development in an interview with Phoenix News, Mr. Hambayi argues that the decision is regressive and may worsen the economic downturn in Zambia, potentially hampering the country’s ability to achieve its targeted Gross Domestic Product-GDP- growth.

According to Mr. Hambayi, Zambia has been grappling with liquidity challenges in the market for the past five years and raising the statutory reserve ratio from the current 11.5% to 14.5% will only addresses the symptoms of these issues and will not tackle the underlying economic problems the country is facing.

He explains that raising the statutory reserve ratio means that banks will be required to hold a larger portion of their deposits in reserve with the central bank, which in turn increases liquidity problems, potentially driving up interest rates and making it more difficult for businesses and individuals to access credit.

PHOENIX NEWS

LEAVE A REPLY

Please enter your comment!
Please enter your name here