By HELEN ZULU –
DESPITE Government easing the monetary policy, commercial bank average lending rates only fell marginally to 26.6 per cent in August 2017 from 29.4 per cent in December 2016, Finance Minister Felix Mutati has said.
Presenting the 2018 National Budget to Parliament yesterday, Mr Mutati said the Government, through the Bank of Zambia (BoZ), had eased the monetary policy significantly in 2017 to make more liquidity available to commercial banks for lending but the response had not been good.
He said monetary performance in 2017 had been positive and the exchange rate of the Kwacha against major tradable currencies had been relatively stable, appreciating by approximately 4.0 per cent to date.
“Inflation has fallen significantly to 6.6 per cent in September 2017 from 18.9 per cent during the same period in 2016. The BoZ eased monetary policy significantly in 2017. The policy rate was reduced from 15.5 per cent in January to 11 per cent in August 2017.
“Statutory reserve ratios reduced from 18 per cent to 9.5 per cent over the same period. The overall performance and condition of the financial sector remained satisfactory as at end-August 2017,” Mr Mutati said.
He said the banking sector also maintained a strong capital adequacy position and satisfactory earnings performance.
Mr Mutati further said private sector credit remained subdued, contracting by 2.9 per cent as at end of August 2017 while asset quality also deteriorated as reflected by increased non-performing loans to 12.2 per cent relative to total loans, compared to 9.7 per cent as at end of December 2016.
He said this was above the internationally acceptable threshold of 10 per cent.
“However, measures are being taken to reverse this trend and restore asset quality in the banking sector.