By TRYNESS MBALE
THE Private Sector Development Association (PSDA) says the intervention by the Bank of Zambia (BoZ) to raise the statutory reserve ratio to 14 percent from eight percent is likely to increase the cost of borrowing.
PSDA chairperson Yusuf Dodia said the upward adjustment is expected to increase the liquidity of the banking system, thereby affecting the cost of borrowing.
“The increase in the statutory reserve ratio means that it will increase the liquidity of the banks system. The increase will also make borrowing more expensive and slow down the growth of the economy,” he said.
Mr Dodia said this in an interview in Lusaka on Wednesday.
He said if Government intends to strengthen the Kwacha, Zambia should attract more local and foreign investment, which will lead to the country having additional foreign currencies.
He said the decision will have an overall negative effect on the growth of the economy.
BoZ has decided to raise the statutory reserve ratio to 14 percent from eight percent effective March 10, 2014 to strengthen the Kwacha in the long run.
Statutory reserve ratio refers to the amount that the commercial banks require to maintain in the form of gold or government-approved securities before providing credit to the customers.
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