The average overnight interbank rate has dropped by 900 basis points from a year-to-date high of 25.1% on June 27 since the Bank of Zambia started implementing Open Market Operations (OMOs) last week. The overnight interbank rate is the rate at which banks lend to one another on a short-term basis. The rate was at 15.96% today:
The central bank announced last week that they had begun open market operations in order to ease the effects of all the monetary policy decisions they made to combat the Kwacha’s depreciation in the first half of the year. The policy rate is at 12%, reserve ratio at 14% and OLF at 22% (as well as restriction of access to OLF) - all of which helped firm-up the Kwacha at the expense of expensive credit. Commercial banks can now charge a maximum of 28% to lenders while micro-finance institutions can charge as high as 46%.
T/bill auction 15
Bank of Zambia received bids worth K392.6m on a total tender amount of K500m according to the results of yesterday’s Treasury bill auction:
The central bank raised 12.9% less than they did at auction 14. The 364 and 273 day t/bill rates increased by 4 and 67 basis points, respectively whereas the 91 and 182 day t bill rates held steady.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *