Bank of Zambia Governor Michael Gondwe in a statement made available to QFM News says on May 30, 2014, the Bank of Zambia took further measures to tighten monetary policy by increasing the rate on the overnight lending facility to 10 percentage points above the policy rate from 6 percentage points.
Dr Gondwe says the central Bank has widened the application of statutory reserves to include Government deposits and Vostro accounts held by foreign financial institutions.
He adds that the Bank of Zambia will also now require Banks to comply with statutory reserve requirements on a daily basis and not on an average basis as was previously the case.
Dr Gondwe states that in addition to these measures the Bank of Zambia has also intervened in the foreign exchange market to improve supply of foreign exchange.
He says this is in line with its policy of managing volatility in the exchange rate, rather than targeting a specific level of the exchange rate.
The Central Bank Governor states that with the measures that have taken, there has been some stabilization in the exchange rate over the past few days.
He says bank will remain alert to ensure that they achieve their objective of a flexible and market-determined exchange rate that reflects market fundamentals and promotes macroeconomic stability.
Dr Gondwe adds that in addition to measures taken to tighten monetary policy, the Central Bank has also held in-depth discussions with stakeholders in the financial sector focusing on the foreign exchange market in general and the operations of the interbank market in particular.
He says it is clear that working with the banking sector, there is a need to improve the efficiency of the foreign exchange market by eliminating the structural rigidities that have emerged, such as the concentration of sources of supply, and the lower sales of foreign exchange, particularly by the mining sector.
Dr Gondwe says the Bank of Zambia will continue to address the key structural constraints in the financial sector.
He further states that the bank is confident that efforts to develop financial markets and make the interbank foreign exchange market more efficient, coupled with the continued strong growth in non-traditional exports, will promote a diversified supply of foreign exchange and help achieve greater resilience in the foreign exchange market.
Dr Gondwe has since assured the general public that the Bank of Zambia and the Government are committed to maintaining macroeconomic stability and ensuring that the year of the country%u2019s golden jubilee becomes a stepping stone towards inclusive growth