Bank of Zambia PRESS STATEME! MEASURES IN RESPONSE TO THE DETERIORATING MACROECONOMIC ENVIRONMENT AND THE CORONAVIRUS ‘The Zambian economy has been facing significant macroeconomic challenges as reflected in low grovth, high fisal deficits rising inflaton and debt service obligations as well as Tow international reserves. The outbreak of COVID-19 pandemie has sompounded the situation, resulting in unprecedented global public health and economic erises. Although the full impact of the COVID-19 shock on public health and the economy cannot be ‘determined atthe moment, indications are that it willbe unprecedented, ‘To complement the measures taken by other arms of Government, the Bank of Zambia has also put together aso of comprehensive measures to safeguard financial system stability, promote the greater use of digital financial services and mitigate the negative effets ofthis shock on the economy. Key among these measures are the Following: 1. Established a Targeted Medium-Term Refinancing Facility with an intial amount of K10 billion to provide medium term liquidity. The amount will be reviewed as conditions warrant. This is thee to five years Facility that willbe avilable to eligible Financial Service Providers (PSPs) to enable them restructure or refitanee qualifying tes oron-lend to eligible clients, Detailed implementation guidelines willbe rolled out as soon as the on-going discussions with the Bankers Assocation of Zambia are ‘conclideds 2. ‘Scaled up open market operations to provide short-term liquidity supporto commercial ‘banks on more flexible terms than those obtaining before the outbreak 9f COVID:19; 3. Revised rules governing the operation of the interbank foreign exchange market to support its smooth functioning, strengthen market discipline and prove a mechanism {or addressing heightened volatility in the exchange rate in periods of stress; ‘April 3, 2020, 4 Page 1 of SaaS Ea eb Wa ‘Sur Co Ran Por a La os OT IH4. Revised loan classification and provisioning rules through the issuance of new Directives as the replacement 1 Statutory Instrument No. 142 of 1956, which i in the process of being revoked. This will allow FSPs to better accommodate lending, refinancing, and restructuring of fcilities to eiial sectors; 5. Extended the transitional arrangement provided for under CB Circslar No. 11/2017, ‘wherein FSPs were granted a 3-year transitional period from 2018 102020 to amorise the ‘Day | Impact of the IFRS 9" for capital adequacy purposes, fo further two-year period up to 31" December 2022 on account of COVID-19;, 6. Allowed eligible non-bank financial institutions to henceforth parially use capital instruments that would not ordinarily qualify as common equity Tier | and Tier 2 capital, for purposes of computing regulatory capital; 7. ‘Stepped up sensitization and is encouraging the use of digital channels and contactless ‘mobile payment mechanisms aimed at preventing the spread of the disease by ‘minimizing person-to-person contac, decongesting banks and other financial institutions premises and reduced use of cash by: (@) Adjusting downwards the Zambia Interbank Payment and Seitlement System (ZIPSS) processing fees to increase the use ofthe Real Time Gross Settlement System (RTGS); () Increasing transaction and wallet limits for individuals, small-sele farmers and enterprises as well as removing thes limits fr agents and corporates; (©) Waiving charges for prson-to-perzon e-money transaction vale of up to K150 by all electronic money issuers, which will be reviewed at end Apel 2020; (@ Approving the use of K8.0 million from interest eamed on Mobile Money Trust ‘ccounls to support the provision of sanitisers at mobile money operator booths ‘Additional support will be provided to promote awareness amongst the public and ‘mobile money service user; and (©) Using commercial banks to remove transfer fees on the bank aceaunt to electronic wallet transactions for an initial period of (3) months and to reduce the Merchant Discount Rate (MDR). 8. Implemented Business Continuity protocols that will ensure that systemically ;prtant payment systems and financial market infastructures remain availabe ‘April 3, 2000 4 Page 20f3 ‘su Co an PO es na a 31D Fs TIM Pah perm Wa‘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 poics framework. The ‘Bank will contin to monitor the situation and take any additonal measures it dems appropriate to safeguard financial system stability. ‘Stay safe. Practice social distancing. Go cashless. Issued by, Den , Kalyalya (Dr) GOVERNOR April 3, 2020 ‘April 3, 2020, 4 Page 30f3 ‘nk ee RnR, ox 3 Lk, ai 2021 01H, F224 SH. El grea we