Bank of Zambia Governor Danny Kalyalya says more efforts need to be made in order to contain the high debt levels which have significantly risen in the recent past.
And Dr Kalyalya says it is worrying that lending rates had remained high in spite of the Central Bank’s decision to ease the monetary policy.
Meanwhile, Dr Kalyalya says it has been an honour to serve as BoZ governor and hopes his predecessor will continue with the culture of transparency, which he espoused.
At a press briefing in Lusaka today, Dr Kalyalya said debt levels had risen significantly in the recent past.
“We see that the export grew from 1.9 billion to 2.1 billion. Look at imports, imports also did grow from 1.9, you will see that even though they both grew, exports grew faster. But now when you have a deficit, obviously it has to be financed by something. So what we see is that there was a grow-down of the debt to finance that and then the public financial account contributed. What we note is that the fiscal primary data indicate that fiscal deficit of 1.4 percent of GDP on a cash basis was recorded in few things,” Dr Kalyalya said.
“We are noting that this is encouraging but a lot more still needs to be done in terms of fiscal consolidation, in terms of also containing debt as you have been covering in the media, the debt levels have risen so significantly in the recent past. Part of the contribution to that is the fiscal. So what we are urging is that more efforts are being made.”
Dr Kalyalya said the high fiscal deficit and debt levels continued to pose risks to the macro-economic stability.
“The current relatively high fiscal deficit and debt levels continue to pose risks to macroeconomic stability. For the year to September 2017, the preliminary budget deficit (on a cash basis) was broadly in line with the 2017 budget. The measures taken by government to reform subsidies in the energy and agriculture sectors and to pay down arrears are important steps towards reducing the fiscal deficit. Further steps to contain high debt levels are required. In this regard, under the medium-term debt strategy, the government is realigning its financing away from external to domestic sources to avoid external debt distress and achieve debt sustainability. Others measures underway include legal reforms in public financial management and the contraction of debt,” he said.
Dr Kalyalya noted that economic growth in the last ten months had been slower than the seven percent projection.
“We noted that there is little economic growth to the private sector particularly the productive sectors of the economy. We see that growth is happening but not as strong as we would like it to be. There are also still some risks in the financial stability to the economy in the non-performing loans as we have been indicating still remains high although there has been in recent time some change in direction. We also took account of the fact that economic growth is quiet slow as there is some projected growth this year, nest year, and the year after but still not anywhere in the 7 percent range as seen since 2011 to 2013,” Dr Kalyalya said.
And Dr Kalyalya said it was worrying to note that the average nominal lending rates for commercial banks still remained high.
“Yield rates on both Treasury bills and government bonds continued to decline, reflecting increased demand. The weighted average yield rates for Treasury bills and government bonds dropped to 10.6 percent and 17.2 percent in September 2017 from 14.1 percent and 19.9 percent in June 2017, respectively,” Dr Kalyalya said.
“Average nominal lending rates for commercial banks remained high, declining only marginally to 25.4 percent in September 2017 from 26.6 percent in June 2017. In addition, the highest lending rate increased to 39.5 percent in September from 37. 0 per cent in June 2017 in spite of the easing of monetary policy.”
Dr Kalyalya also said that deposit rates had gone down.
“Deposit rates (cost of funds) have come down, with the highest interest rates on wholesale deposits declining to 27.0 percent in September from 29.5 percent in June. The savings rate for 180-day deposits for amounts exceeding K20 000 also declined to 9.4 percent from 11.0 percent, whilst the average savings rate for amounts below K100 was virtually unchanged at 1.9 percent,” he added.
Meanwhile, Dr Kalyalya, whose term comes to an end in February, said it was an honour to serve as BoZ governor.
“Success is not something that one can attribute to an individual, I am just a figure-head here, there are all these colleagues, there are others who are not in the room here who contribute immensely to what you have seen eventually being presented here. So I am very honored for the opportunity to actually serve in this institution,” Dr Kalyalya said.
“So transparency I think is one issue you can associate with the Central Bank during this period but we are also not running away from accountability. So we will do our part and we will continue to do as our part as Central Bank. As we said, we will not shy away from scrutiny. We have embraced very strongly the issue of evidence base, we make decisions based on the information that we have. So I am proud to have been associated with the institution and the colleagues that I have served with.”