LUSAKA, June 2 Zambia's central bank said it was
increasing its overnight lending rate for commercial banks to 10
percentage points above the benchmark policy rate from 6
percentage points, in what traders said was another bid to prop
up the ailing local unit.
In a circular to banks seen by Reuters on Monday, the Bank
of Zambia also said it would now subject government local and
foreign currency deposits to statutory reserve requirements,
currently at 14 percent.
"These measures will further tighten liquidity on the market
because in the past government deposits were not subject to
statutory reserves," one commercial bank trader said.
"The adjustment of the overnight lending facility rate ...
means the cost of funding from the central bank as lender of the
last resort will go up. This should ultimately support the
The kwacha jumped nearly 4 percent to 6.5500/6500
against the dollar on Monday, pulling away from recent all time
lows mainly caused by the weak price of copper, of which Zambia
is Africa's second largest producer.
(Reporting by Chris Mfula; Writing by Stella Mapenzauswa;
Editing by Helen Nyambura-Mwaura)