In a move seen as a desperate attempt to thwart the free-fall of Kwacha and rising inflation, the Bank of Zambia (BoZ) has hiked the Statutory Reserve Ratio (SRR) by nine percent to 26 percent.
This move would result in the high cost of borrowing as interest rates on the current loans would follow suit.
Bank of Zambia (BoZ) Deputy Governor –Operations, Francis Chipimo, said in a circular on Friday that with effect from February 5, 2024, the minimum statutory reserve ratio would increase to 26 percent from 17 percent respectively.
“The BoZ wishes to advise all commercial banks that with effect from February 5, 2024 that the minimum statutory reserve ratio on both local and foreign currency deposits will be increased by nine percent to 26 from 17 percent,” Chipimo stated.
He said in terms of compliance, the revised statutory reserve ratio would be based on the weekly return of selected assets and liabilities as of Wednesday, January 31, 2024.
Chipimo stated that the increase in statutory reserve ratio was necessitated by persistent high demand pressures in the foreign exchange market contributing to high inflation.
“BoZ will continue to closely monitor developments in the macroeconomic environment in general and in the financial markets in particular,” he assured.
Chipimo further said the Central Bank was ready to take further measures should they deem it necessary in line with its mandate of maintaining price and financial stability.
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