The current exchange rate situation requires extra ordinary measures for it to be addressed, hence upward adjustments in the statutory reserve ratio for financial institutions, says the Bank of Zambia (BoZ).
On November 6, 2023, the BoZ adjusted its Statutory Reserve Ratio on both the Kwacha and foreign by three percent in an effort to relieve pressure on the local currency.
The minimum statutory reserve ratio on both local and foreign currency deposits, including government and Vastro deposits were increased by three percentage points to 14.5 percent from 11.5 percent.
On November 21, 2023, the statutory reserve ratio was adjusted by a further 250 basis points to 17.0 percent, effective November 27, 2023.
BoZ Governor, Denny Kalyalya, in responding to concerns on the adjustments from stakeholders explained that these were extra ordinary measures needed to stabilise the situation.
Kalyalya said this at the Monetary Policy Rate announcement for the fourth quarter of 2023 on Wednesday in Lusaka.
“It looks like that did not have the intended effect, we therefore had to revisit that measure and we concluded that additional adjustment is required. All these are extra ordinary measure that we though were necessary to address an extra ordinary situation that we are facing, people may ask are you not making things worse?
“Well, our view is that the situation we are experiencing is not a good one anyway, so we cannot just watch it because it will deteriorate even further so we have curtail these measures and review them as time goes by so that we can make adjustment as the situation dictates,” he said.
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