The Bank of Zambia has this week cut the benchmark lending rate. The new rate will be 12.5 percent, a reduction of 150 basis points. In announcing the move BoZ Governor Denny Kalyalya referenced lower levels of inflation and subdued economic growth.
Borrowers and businesses are now watching to see if commercial banks pass on the reduction to their customers, essential both for stimulating private sector activity and job creation, as well as for relieving the pressures on families, farms and communities struggle facing the prospect of repossession or closure.
Commercial banks in Zambia have been lending at some of the highest rates in the region and at as much as 48%, a rate First National Bank (FNB) reduced by a modest 1.5 percent earlier this year. By way of comparison in South Africa the average commercial bank lending rate is thought to stand at around 10.5%, in Botswana at around 7.5% and even in Zimbabwe is only as high as 18% .