The Bank of Zambia has advised all commercial banks that with effect from Monday, February13, 2023, the minimum statutory reserve ratio on both local and foreign currency deposits, including Government deposits and Vostro accounts deposits, will be increased by 2.5 percentage points to 11.5 Percent from the current 9.0 percent.
In a statement issued by Deputy Governor Operations Dr. Francis Chipimo, the revised statutory reserve ratio of 11.5 percent will be based on the Weekly Return of Selected Assets and Liabilities as of Wednesday, February 8, 2023.
The Central Bank said this measure is aimed at safeguarding stability of the foreign exchange market and addressing the increased volatility in the exchange rate which intensified in December 2022 and has persisted in 2023.
It said the exchange rate has come under sustained depreciation pressure despite the Bank of Zambia’s support to the market through sales of foreign exchange proceeds, mostly from mining companies, hence it says if the trend is left unaddressed the emerging stable macroeconomic Environment can be undermined.
“The Bank of Zambia will continue to closely monitor developments in the macroeconomic
environment and in particular, financial markets and take appropriate action as and when the need
arises in line with the Bank’s objectives of price and financial stability. At any rate, the Bank will
review the measure by June 2023“.
Meanwhile, responding to the statement by the Bank of Zambia, social Economist kelvin Chisanga explained that Zambia’s current market remains with a thin supply of dollars on the market hence the kwacha has been depreciating on a daily basis.
Mr. Chisanga stated that the instruction by the Bank of Zambia to commercial banks is a measure that will try and cushion the kwacha from further depreciating to the demand or lack of foreign currency in circulation.
He h further remained expectant that the increase in deposits will also prevent the negative effects of inflation from reaching double figures.