This came after Netanyahu's government announced the closure order for an initial period of 45 days
mena1 hour ago
Zambia has operated an open market system since it liberalised economic policies in the early 1990s. Under the current regime, Zambian commercial banks determine their own lending rates without any official reference point.
The Bank of Zambia’s deputy governor for operations, Denny Kalyalya, said the fixed rate system would allow the central bank to influence lending rates commercial banks charge.
‘It is like what others like South Africa are doing. You pick a particular short-term interest rate and that becomes the reference rate to which the financial players refer when they are doing business. It becomes a wholesale rate,’ Kalyalya told Reuters.
‘We are reviewing the framework with a view to moving to this way of implementing monetary policy (where) we identify a short-term interest rate which has an effect on the market such that when we announce the rate, market players relate to that.’
‘We have started some aspects of it but to get to that point, there are a number of preparatory works that have to be done,’ Kalyalya added.
As part of the new monetary shift, the central bank on Tuesday introduced an overnight lending facility, which Kalyalya said would enable the central bank to provide liquidity to the market whenever necessary.
‘Our role will be to facilitate (managing any) shortfall that is in the market. That is starting before we can move towards (applying official) interest rates,’ Kalyalya said.
Saviour Chibiya, the managing director of Citi’s Zambia unit, said a fixed rates system in the local market would address the difficulty of determining a rate suitable to both lenders and borrowers.
‘This window at the central bank will therefore aid liquidity management of the banks and hopefully have a positive influence on overall interest rates,’ Chibiya said.
But Lusaka-based economic analyst Chibamba Kanyama said bank deposit rates and savings could fall further under the new system and that banks would be hesitant to lend to high-risk consumers.
Other banks operating in Zambia are Barclays Bank Plc, a unit of Barclays Bank , Zanaco, part-owned and managed by Rabobank, Finance Bank, which is partly owned by Credit Suisse and Standard Chartered Bank Plc.
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