Businesses in Zambia have urged the central bank to reverse some of its monetary policies introduced to stem the depreciation of the local currency because they have fueled a rise in interest rates, the Post of Zambia reported on Monday.
Last month, the Bank of Zambia (BoZ) announced a number of monetary policies to curb the depreciation of the local currency such as raising the overnight rate that lenders use to borrow from each other and ordered reserves to be set aside for Zambian accounts held abroad.
Overnight borrowing costs were increased to 22 percent, 10 percentage points above a key policy rate of six percent previously, while subjecting foreign-exchange accounts to a 14 percent statutory reserve ratio.
But the Zambia Chambers of Commerce and Industry (ZACCI), an umbrella body of the business community, have complained that the new measures have tightened market liquidity and seen commercial banks jostling to raise their lending rates.
"We are now concerned by the recent increase in interest rates which have gone up to an average of 24 percent. We are cognizant that this increase is as a result of the Bank of Zambia policy decision to tighten monetary policy so as to reduce liquidity levels in the economy," Geoffrey Sakulanda, the president of the business association was quoted as saying by the paper.
"But the high interest rates make it extremely difficult for business and individuals to borrow t improve and expand their business operations thereby creating jobs for the many unemployed Zambians," he added.
The situation, he said, was worrying especially that loans already contracted were now being serviced at the new and higher interest rates, adding that the high interest rates risk fueling inflation as the increased high cost of running businesses would be passed on to consumers.
"We call upon the Bank of Zambia to immediately reverse this decision. The trend of increasing the cost of capital observed of late will have a negative impact on business and national development objectives and reverse key economic gains already achieved," he added.