By MAIMBOLWA MULIKELELA –
CONCERN has continued over the Bank of Zambia (BoZ) decision to increase the statutory reserve ratio from 14 per cent to 18 per cent with the private sector fearing this will stifle their full potential to invest in the economy due to possible high lending rates as a result of the new measure.
Last month the BoZ raised the amount of money that commercial banks were required to deposit to 18 per cent as of April 8, this year in a bid to address volatility of the Kwacha.

. Dodia

PSDA chairperson Yusuf Dodia expressed fears that the adjustment in the reserve ratio meant that commercial banks would have less capital for use for their operations because of the expected increase on the cost of funds on the market.
Mr Dodia said in an interview in Lusaka that this would reduce private sector investment in the economy as the cost of borrowing from the banks would be high.
“The increase in the statutory reserve ratio is not good for the private sector. This means that the value of the loans and overdraft will increase making it difficult for the private sector to borrow,” Mr Dodia said.
He said the adjustment would see an increase in the lending rates which would prevent most private sector players from borrowing for investment purposes.
He said it was also expected that the prices of the commodities would go up once commercial banks adjusted their lending rates.
The Bankers Association of Zambia (BAZ) has also expressed its concern over the changes by the BoZ noting this would lead to increasing lending rates.