By Jane Chanda
The Bankers Association of Zambia (BAZ) has expressed optimism that interest rates would improve as inflation comes under control.
Speaking during the town hall forum on the first quarter budget and economic performance held in Lusaka on Friday, BAZ executive officer Leonard Mwanza said the current high interest rates were a result of the Monetary Policy Rate (MPR) being set at 14.5 percent to control escalating inflation.
He said with inflation expected to taper down to within the medium target range of six to eight percent, interest rates would also come down.
“As inflation keeps coming down, we can only look forward to a reversal in terms of the base on the Monetary Policy Rate,” he said.
Mwanza said that managing food inflation and ensuring high production levels in key sectors such as agriculture and mining could lead to more affordable interest rates. He said households and businesses competed for resources in the banking sector while high interest rates affected both parties.
“Households are affected by the high cost of living and inflation,” Mwanza said. “If we can manage food inflation and ensure high production in terms of copper, bringing in more foreign exchange inflows, we can manage the volatility of the Kwacha and make interest rates more affordable. With the possibility of single-digit inflation, interest rates could start improving, making borrowing more affordable for both individuals and businesses.”
He said the banking sector had been working to support key sectors of the economy, including agriculture and manufacturing and that during the last farming season, the sector supported over 1,500 large-scale farmers who accessed financial support to grow winter maize.
Mwanza said that the sector’s adoption of technology and digitisation had been a key driver of its success and that the banking sector was working to ensure a more digital economy, with payment processing options available from 07:00 to 19:30 hours and over the weekends.
