Regulatory Alerts2003-01-01
CB Circular 17/2003: Statutory Reserve Ratio
The Bank of Zambia issued Circular 17/2003 to reduce the minimum statutory reserve ratio on Kwacha and foreign currency public deposits from 17.5 percent to 14.0 percent, effective October 31, 2003. This 3.5 percentage point cut aims to increase money market liquidity, lower borrowing costs, and signal broader interest rate reductions to stimulate economic growth and expand cheaper credit to productive sectors like agriculture and manufacturing. Commercial banks must apply the revised 14.0 percent ratio to their Wednesday asset and liability positions as of October 22, 2003, while the central bank maintains readiness to implement further macroeconomic measures as needed.
# BANK OF ZAMBIA
## OFFICE OF THE DEPUTY GOVERNOR - OPERATIONS
October 31, 2003
**CB Circular No: 17/2003**
**To:** All Commercial Banks
## STATUTORY RESERVE RATIO
Kindly refer to CB circular No. 21/2002 dated 13 December 2002.
The Bank of Zambia wishes to advise all commercial banks that with effect from October 31, 2003, the minimum statutory reserve ratio on both the Kwacha and foreign currency deposit liabilities to the public will be reduced by 3.5 percentage points to 14.0 percent from 17.5 percent.
The reduction is intended to improve availability of liquidity in the money market with a view to reduce the cost of funds to the borrowing public. The Bank of Zambia expects this action to serve as a signal to other stakeholders to follow suit in taking appropriate measures in their respective areas to bring about a general downward movement in the level of interest rates in the country to promote economic growth and development. In the case of commercial banks, it is expected that this move will enable them to extend credit to the productive sectors of the economy, such as, agriculture, manufacturing, tourism and mining at relatively lower cost.
Commercial banks are further advised that in terms of compliance, as regards the Weekly Return on Selected Assets and Liabilities, the revised statutory reserve ratio of 14.0 percent will be applied on the Wednesday position of October 22, 2003.
As stated previously, the Bank of Zambia will continue to monitor developments in the macroeconomic environment and stands ready to take other measures as deemed necessary.
Denny H Kalyalya (Dr.)
**DEPUTY GOVERNOR – OPERATIONS**
Cc Governor
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Bank Square, Cairo Road P.O. Box 30080, Lusaka, Zambia Tel: +260-1-226844 Fax: +260-1-237070 Email: dkalyaly@boz.zm Web: http://www.boz.zm/
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