BoZ Cuts Reserve Ratio to Boost Lending

Kalyalya says move will increase liquidity in banking sector as central bank defends financial regulations

By Francis Maingaila

LUSAKA, Zambia24 — 31 July 2026 — The Bank of Zambia (BoZ) has reduced the statutory reserve ratio on Kwacha deposits from 26 percent to 21 percent, a move Governor Dr. Denny Kalyalya says will inject more liquidity into the banking system and give commercial banks greater capacity to support businesses and economic activity.

Dr. Kalyalya said the adjustment, effective Monday, August 3, 2026, will allow banks to retain a larger share of their Kwacha deposits instead of keeping the funds as reserves with the central bank.

He said the measure is expected to improve financial intermediation by creating more room for commercial banks to provide financing to productive sectors such as agriculture, manufacturing and small and medium enterprises.

The Governor said the reduction applies to Kwacha deposits, including Government and Vostro deposits, while the statutory reserve ratio for foreign currency deposits remains unchanged at 26 percent.

Dr. Kalyalya explained that the adjustment was made in accordance with Section 47 of the Bank of Zambia Act, 2022, which gives the central bank authority to set statutory reserve requirements as part of its monetary policy tools.

He said the decision is aimed at ensuring that resources within the banking system are available to support economic activity while maintaining price stability.

Dr. Kalyalya further announced that commercial banks will now be required to meet statutory reserve obligations on a weekly basis instead of daily.

He said the revised arrangement will give banks more flexibility in managing liquidity while ensuring that they continue complying with reserve requirements.

However, the Governor said BoZ will continue monitoring the impact of the adjustment to ensure that increased liquidity supports economic growth without putting pressure on inflation.

Zambia’s Economy Remains Resilient Amid Global Uncertainty

Dr. Kalyalya said Zambia’s economy remains resilient despite growing uncertainty in global markets, with strong copper export earnings, prudent monetary policies and rising foreign exchange reserves helping to cushion the country against external pressures.

He said although global tensions have contributed to higher oil prices and uncertainty in international markets, Zambia has remained relatively stable because copper prices continue to support foreign exchange inflows.

“Although the price of oil has gone up, our main export commodity remains highly priced. That provides a cushion to the Kwacha because of the foreign exchange inflows coming from exports,” Dr. Kalyalya said.

He said the stability of the Kwacha reflects a combination of strong export performance, improved economic management and reforms aimed at strengthening the financial system.

The Governor said Zambia has not experienced significant speculative attacks on its currency but continues to monitor developments in the global economy.

“A lot depends on what happens to our exports. We are all on the receiving end of global developments and our hope is that the uncertainty affecting the world economy will come to an end,” he said.

Foreign Exchange Reserves Provide Economic Cushion

Dr. Kalyalya said Zambia’s growing foreign exchange reserves have become one of the country’s key economic safeguards, allowing the country to continue importing essential goods even during difficult global conditions.

He explained that reserves are important because Zambia relies on export earnings to obtain foreign currency needed to pay for imports such as fuel, medicines, machinery, spare parts and other goods that cannot be produced locally.

“We print the Kwacha, but we do not print the dollar. We earn dollars through exports of goods and services,” he said.

The Governor explained that foreign exchange reserves are measured through “months of import cover”, which shows how long the country can continue paying for imports if foreign exchange inflows are disrupted.

Using a household example, Dr. Kalyalya said reserves are similar to keeping enough food in the house to survive during difficult times.

“If nothing came in today, how long would we survive? That is what reserves tell us,” he explained.

He said strong reserves also help build confidence among investors, international lenders and trading partners because they demonstrate Zambia’s ability to meet its external obligations.

Dr. Kalyalya recalled that during the COVID-19 pandemic, Zambia received additional resources from the International Monetary Fund (IMF), which helped Government finance programmes such as the recruitment of teachers and health workers, expansion of social cash transfers, Cash-for-Work programmes, free education and agricultural support.

He said Government agreed with the IMF to use part of the resources to support the national budget while maintaining adequate reserve levels.

“The reserves help moderate economic pressure and allow Government to focus resources on development priorities instead of constantly worrying about external obligations,” he said.

BoZ Strengthens Economic Monitoring

Dr. Kalyalya said the central bank has introduced reforms aimed at improving monitoring of economic activities and strengthening policy decisions.

He said export tracking systems, import screening, smart invoicing and modern payment systems are helping authorities gain a clearer understanding of economic activities.

According to the Governor, the reforms provide policymakers with what he described as a “360-degree view” of the economy, making it easier to identify risks and respond appropriately.

He said monitoring exports has become increasingly important during periods of global uncertainty to ensure that export earnings are properly accounted for.

The Governor added that import screening helps authorities understand the country’s foreign exchange requirements and plan accordingly.

BoZ Defends Customer Verification Rules

Dr. Kalyalya defended Know Your Customer (KYC) requirements in the banking sector, saying the rules are necessary to protect the financial system from fraud, money laundering and other criminal activities.

He said while some people believe banking regulations should be relaxed, removing customer verification requirements would expose citizens to fraudsters and weaken confidence in financial institutions.

“You cannot identify a fraudster simply by looking at them. You have to know who you are dealing with,” he said.

The Governor, however, said the Bank of Zambia has simplified account-opening requirements for individuals, especially those without formal employment, while maintaining stricter standards for businesses.

Financial Inclusion Continues to Grow

Dr. Kalyalya dismissed suggestions that financial inclusion is declining in Zambia, saying access to financial services has increased significantly.

He said financial inclusion rose from 69.4 percent in 2020 to 80.1 percent in 2025, reflecting increased access to banking and other financial services.

The Governor said BoZ is also promoting financial literacy after working with stakeholders to introduce financial education into the national curriculum.

He said equipping young people with financial knowledge will help them make informed decisions and reduce their vulnerability to financial scams.

Digital Payments Improve Transparency

Dr. Kalyalya said the central bank remains committed to promoting digital financial services as part of efforts to modernise Zambia’s payment systems.

He welcomed Government’s decision to introduce cashless payments for agricultural produce, describing the move as an important step towards improving transparency and reducing risks associated with cash transactions.

He said digital payments create electronic records that make it easier to trace financial activities.

“Cash has no face. If you pick up a K500 note, it cannot tell you who dropped it, but digital transactions leave a trace,” he said.

The Governor said recent foreign exchange reforms are not intended to artificially strengthen the Kwacha but to maintain exchange rate stability.

He said a stable exchange rate helps businesses plan better, allows shops to maintain consistent pricing and reduces uncertainty for importers and consumers.

Governor Urges Responsible Borrowing

Dr. Kalyalya urged citizens to borrow responsibly, saying both borrowers and lenders have a role in maintaining a healthy financial system.

He said regulated financial institutions are required to assess borrowers’ repayment capacity before approving loans, while BoZ regularly inspects lending institutions to ensure compliance with responsible lending standards.

The Governor said lenders are encouraged to use credit reference bureaux to check customers’ existing debts before extending additional credit.

Money Lenders to Come Under BoZ Supervision

Dr. Kalyalya disclosed that money lenders will now fall under the regulatory authority of the Bank of Zambia following amendments to the Banking and Financial Services Act.

He said the move will close regulatory gaps that have allowed some operators to exploit consumers while falsely creating the impression that they are supervised by the central bank.

Governor Warns Against Scammers

Dr. Kalyalya warned the public against fraudulent investment schemes, saying scammers continue to exploit people’s desire to make quick money.

He said fighting financial crime is not the responsibility of regulators alone because fraudsters operate within communities.

The Governor urged citizens to report suspicious activities and avoid schemes promising unusually high returns.

He said many scams continue because victims fail to report perpetrators or continue protecting them even after losing money.

Dr. Kalyalya called for increased financial education, saying informed citizens are less likely to fall victim to pyramid schemes and other fraudulent investment arrangements.

Village Banking Not Under Threat

Dr. Kalyalya dismissed reports suggesting that the Bank of Zambia intends to ban village banking.

He clarified that genuine village banking groups operating as community savings schemes are not targeted by the central bank.

He said BoZ’s concern is with illegal schemes that disguise themselves as investment platforms while operating fraudulent pyramid structures.

Counterfeit Notes Remain Under Control

Dr. Kalyalya assured the public that Zambia’s banknotes remain secure despite reports of counterfeit currency.

He said increased detection of fake notes reflects improved public awareness and stronger security screening rather than a rise in counterfeiting.

The Governor encouraged citizens to carefully examine banknotes and avoid exchanging money in suspicious places, especially poorly lit areas.

He reminded the public that old banknotes withdrawn from circulation are no longer legal tender and cannot be used for transactions.

Dr. Kalyalya said withdrawn notes are destroyed by the Bank of Zambia after being removed from circulation, although some may retain value among collectors.

He urged the public to continue supporting financial education initiatives and report suspicious financial activities to help safeguard Zambia’s financial system.