The Bank of Zambia (BoZ) has announced that it has established a targeted medium-term refinancing facility with an initial amount of K10bn ($543m) to provide medium term liquidity in light of the COVID-19 pandemic.
In a statement, BoZ Governor Dr Denny Kalyalya, said the K10bn ($543m) is part of a comprehensive list of measures that the central bank is taking to respond to the COVID-19 crisis.
Kalyalya said although the full impact of the COVID-19 shock on public health and the economy cannot be determined at the moment, indications are that it will be unprecedented.
He explained that this is a three to five years facility that will be available to eligible financial service providers (FSPs) to enable them restructure or refinance qualifying facilities or on-lend to eligible clients and that the amount will be reviewed as conditions warrant.
Kalyalya explained that detailed implementation guidelines will be rolled out as soon as the on-going discussions with the Bankers Association of Zambia are concluded.
He added that other measures the central bank is implementing include scaled up open market operations to provide short-term liquidity support to commercial banks on more flexible terms than those obtaining before the outbreak of COVID-19, revised rules governing the operations of the interbank foreign exchange market to support its smooth functioning, strengthening market discipline and providing a mechanism for addressing heightened volatility in the exchange rate in periods of stress.
Kalyalya pointed out that the central bank has revised loan classification and provisioning rules through the issuance of new directives as the replacement to Statutory Instrument No. 142 of 1996, which is in the process of being revoked.
“This will allow FSPs to better accommodate lending, refinancing, and restructuring of facilities to critical sectors,” he said.
He said the central bank has allowed eligible non-bank financial institutions to henceforth partially use capital instruments that would not ordinarily qualify as common equity Tier 1 and Tier 2 capital, for purposes of computing regulatory capital.
“Stepped up sensitisation and encouraging the use of digital channels and contactless mobile payment mechanisms are aimed at preventing the spread of the disease by minimising person-to-person contact,” he said.
Kalyalya said the central bank has implemented business continuity protocols that will ensure that systemically important payment systems and financial market infrastructures remain available.
“Other monetary policy tools available will remain options that may be deployed should conditions so warrant, consistent with the Bank of Zambia forward-looking monetary policy framework. The bank will continue to monitor the situation and take any additional measures it deems appropriate to safeguard financial system stability,” he said.