BoZ to maintain key lending rate

The Bank of Zambia (BoZ) has maintained its key lending rate at 9.75 percent due to a fragile economic growth evidenced by subdued credit growth to private enterprises.

BoZ said it decided to maintain the monetary policy rate as it felt it was appropriate to do so and that this was in line with the projections indicating that inflation will remain within the 6-8 percent target range.

The central bank has also decided to maintain the statutory reserve ratio at 5 percent.

Denny Kalyalya, Governor of the Central Bank, said the bank also considered the need to strengthen the resilience of the financial sector to domestic and external shocks, adding that although real sectors indicate a steady pickup in annual economic growth, growth remains fragile.

He said the central bank decided to maintain the two instruments to help induce the lowering of high interest rates and boost economic growth.

According to the central bank chief, projections indicate that inflation will rise above 7 percent during the second and third quarters of 2018 but decline thereafter towards the lower bound of the 6-8 percent target range.

He attributed the fragility in the economy to weak credit growth to the private sector, mainly driven by huge than programmed budget deficits, high lending rates and rising non-performing loans.

"The Bank will continue to closely monitor domestic and external sector developments and stand ready to implement appropriate measures to maintain price and financial system stability, and to support economic growth," he told reporters during a press briefing.

Meanwhile, the central bank chief revealed that the country's preliminary fiscal deficit of 6.1 percent of Gross Domestic Product (GDP) was likely to be revised upwards in the wake of a recent debt sustainability analysis.

He said the 2018 budget estimates are also expected to undergo some revisions, adding that higher than programmed fiscal outcomes in 2018 would heighten risks to macroeconomic stability. 

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Bank of Zambia LENDING RATE