ZAMBIA HAS OVER K6.4BN ROAMING FREELY - BAZ
OVER K6.4 billion is estimated to be circulating outside the banking sector because Zambia is a cash economy thereby creating a shortage of funds for productive sectors, says the Bankers Association of Zambia (BAZ).
A cash economy is where goods and services are paid for in cash, and therefore not declared for tax.
BAZ chief executive officer, Leonard Mwanza, said in an interview in Lusaka that the development had resulted to lack of funds being channelled to productive sectors of the economy.
“No funds are available for channelling to the private sector, that money is not available to be channelled to the productive sector, if it was within then it could be available for credit extension but since it is outside, it cannot be used to support productive sectors,” Mr Mwanza said.
And on the slow reduction of interest rates, Mr. Mwanza said economic conditions and higher interest rates had led to failure to meet loan obligations and this had increased NonPerforming Loans (NPLs).
Mr. Mwanza said the legacy of monetary policy tightening in 2015-2016 mopped up liquidity from the market leading to higher interest rates resulting to banks carrying high cost fixed deposits from pension houses such as National Pension Scheme Authority that were expected to unwind in the fourth quarter of 2017.
He also said Government arrears was impacting liquidity and capital supply in the financial market.
“Delayed payment of suppliers by Government has contributed to higher NPLs. The entire banking industry is affected by contagion coming from all unpaid Government contractors and suppliers. Total industry savings are below the country’s Gross Domestic Product and this is not sustainable to create long term affordable funding,” Mr Mwanza said.