Maravi

Interest rates are still high, says Fundanga

Interest rates are still high, says Fundanga
By Kabanda Chulu
Tuesday February 05, 2008 [03:01] P

Bank of Zambia governor Dr Caleb Fundanga (right) has said there is need to find ways of sustaining and increasing the US$924 million that the country recorded last year in non-traditional exports. And Dr Fundanga has said the biggest challenge facing the central bank is to find ways of reducing interest rates because they are still high despite recent reductions by some commercial banks.

On average most commercial banks were currently charging interest rates between 15 per cent and 24 per cent and there have been concerns that this situation has resulted in many Zambians not to feel the benefits of the recent economic growth.

Speaking last Friday in Lusaka, Dr Fundanga said the growth recorded in the non-traditional sector in 2007 of US $ 924 million was unprecedented because in 2000, Zambia just accumulated about K800 million in all the sectors.

“Largely due to the growth in the economies of our trading partners, our non-traditional exports rose to an unprecedented level of US $ 924 million, this is important for the economy in general and there is need to find ways of sustaining and increasing this growth so that its benefits can be felt by ordinary people,” he said

He said the maintaining of the import coverage of gross international reserves at not less than three and half months was a result of having enough foreign exchange (forex) in the country.

“During the past year, we accumulated more forex than required due to the cancellation of foreign debt and higher copper prices on the international market hence, we are able to satisfy the market because the demand is low so this import cover of three and half months for gross international reserves is commendable,” Dr Fundanga said.

Dr Fundanga also observed that the kwacha would continue to gain in the short to medium term because of insufficient demand for the United States dollar.

He said there was need to have stability in the exchange rate but it should not be stationery.

"There are more dollars in circulation than demand hence, the kwacha will continue to be stable in the short to medium term. As the central bank, we are just regulators and not drivers and all what we hope for is stability in the exchange rate which should not be stationery.

However, everything depends on market forces, that is demand and supply," Dr Fundanga said.

Since April 2007, the kwacha has gained relative stability and appreciation against major convertible currencies by trading below the K4, 000 margins.

According to last Friday’s BOZ exchange rates, the kwacha was trading at K3, 812 against the US dollar, K7,585.53 against the British pound K5,667.80 against the Euro and K524.79 against the South African Rand.

And Dr Fundanga said the reduction in interest rates by some banks was not sufficient enough to allow people to feel the benefits of the current economic growth.

“Many Zambians have brilliant business concepts but they have no access to capital finances because interest rates are still high and these are some of the factors that we should look at if people are to feel the benefits of the current economic growth,” said Dr Fundanga.

“Actually the biggest challenge facing us (BOZ) is to find ways of reducing interest rates to such affordable levels that people will be able to access finances thereby getting the benefits being recorded at macroeconomic level.”

Labels: CALEB FUNDANGA, INTEREST RATES

posted by MrK @ 3:20 AM