By BUUMBA CHIMBULU
BORROWERS and the general public should agree with their bankers on the most cost-effective option of managing the increase in interest rates, Bankers Association of Zambia (BAZ), has said.
BAZ Chief Executive Officer, Leonard Mwanza, said the industry anticipated that interest rates would remain high due to increase in the cost of funds on the interbank and the open market.
Mr Mwanza explained that the increase in the policy rate to 11.5 percent from 10.25 percent would automatically result in an increase in interest rates by 125 basis points for all monetary policy linked credit facilities.
The Bank of Zambia increased the policy rate due to high inflation.
“Customers are hereby advised to take note of the notifications from the various banks and make their own informed and independent decision to either increase their repayments or loan tenure,” Mr Mwanza said.
He also said commercial Bank’s support to productive sectors would be weighed down due to the increasing stock of arrears which included loan repayments for Government workers.
Mr Mwanza said banks committed to continue playing their role in supporting productive sectors of the economy and Logistics areas to help in reversing the slowdown in economic growth. He however said this would be weighed down by the increase in interest rates, Kwacha depreciation, electricity shortages and the increasing stock of arrears which now also included loan repayments for Government workers.
He explained that loan repayments for Government workers may put pressure on Non-Performing Loans (NPL’s) which dropped to 9.4 percent in September, 2019 but as high as 25 percent in the Micro Finance sector.
Mr Mwanza had therefore appealed to Government to reduce the stock of arrears on Third Party recoveries to avoid worsening the deterioration of the NPL’s, which may lead to assets erosion and reducing capacity to on lend.