11 November 2009
THE fourth quarter of 2009 is expected to see a huge drop on yield rates on treasury bills which will induce reductions in lending rates, Bank of Zambia (BoZ) Governor, Caleb Fundanga has said.
By September 2009, the weighted average yield rates on treasury bills declined to 17.5 per cent compared with 18.8 per cent in June 2009 while the weighted average yield rate on bonds rose to 19.1 per cent from 18.9 per cent in June 2009.
Dr Fundanga said the latest yield rates on treasury bills was around 10 per cent and that the rate was expected to drop further, thereby lowering lending rates in the banking sector to fall.
He said the drop on yield rates on treasury bills was an important component because it had an impact on lending rates.
Dr Fundanga was speaking at a third quarter of 2009 media briefing in Lusaka yesterday.
"There has been a public outcry on high lending rates and we are hopeful that the low yield rates will lower lending rates in the banking sector," he said.
And Dr Fundanga reiterated the central bank's caution to the public against issuing cheques when their accounts have insufficient funds, saying bouncing of cheques is a criminal offence.
The BoZ governor said issuing cheques on accounts without sufficient funds was dangerous and criminal.
He urged the public not to abuse the financial sector by issuing cheques on insufficiently-funded accounts, as doing so would take the country backwards.
Dr Fundanga said there was need for the public to ensure that they had sufficient funds each time they issued cheques.
The total volume of cheques returned unpaid on account of insufficiently-funded accounts fell by eight per cent to 5,117 cheques while the value decreased by 28 per cent to K41.30 billion.
"This is an encouraging trend which the bank would like to see continue. The public is reminded that bouncing of cheques is criminal," Dr Fundanga said.
And Dr Fundanga said inflationary pressures were expected to rise in the fourth quarter of 2009.
He attributed the price increases on manufactured goods in response to the upward adjustments in electricity tariffs in the month of August and the seasonal increases in the prices of beef and beef products as some of the factors that may put pressure on inflation.
"Further, the broader risk to the achievement of the end-year inflation target is likely to increase in the domestic fuel pump prices which have not been adjusted for the past 11 months despite an increase in the international prices of the commodity," he said.
Inflationary pressures would, however, be moderated by the expected stability in the prices of mealie meal and fresh vegetables resulting from increased supply on the market.
Other factors are the relative stability in the exchange rate of the Kwacha against major foreign currencies.
Meanwhile, the gross international reserves increased to US$1,788.9 million in September 2009 from $ 1,171.17 million in June 2009.
As a result, international reserves are expected to rise to about five months of import cover by the end of 2009.
This level of reserves has not been attained in the last 38 years.
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