According to the Bankers Association of Zambia (BAZ), the increase in the statutory reserves ratio to 11.5 percent should only last a limited time because it will probably have an impact on manufacturers’ production costs.
The cost of conducting business would rise, according to BAZ Executive Director LEONARD MWANZA, as banks are anticipated to adjust their new and old loan lending ratios to account for the increase.
According to Mr. MWANZA, funds held in statutory reserves don’t earn interest but instead put pressure on the supply of Kwacha, leading to a lack of cash flow and liquidity.
Additionally, he warns that the country’s cost of products and services will rise as a result of the Kwacha scarcity.
In a Lusaka interview with ZNBC News, Mr. MWANZA stated that fluctuations in inflation also affect small businesses’ investment plans.
To stop the Kwacha’s devaluation, the Bank of Zambia raised the required reserve ratio from 9.5 percent to 11.5 percent.