• Over 50 percent of that is coming from investment in government securities.
• Part of the big investment in government securities had come during the Covid-19 period where essentially risks were heightened.
• The financial sector has to support the real economy in order for the country to grow.
Bank of Zambia (BoZ) has disclosed that commercial banks posted significant rise in profits between 2021 and 2022.
Bank Deputy Governor- Operations, Dr. Francis Chipimo revealed that over 50 percent of the profit was as a result of massive investment in government securities.
Dr. Chipimo recently explained that part of the big investment in government securities came during the Covid-19 period when risks were heightened and banks were pulling back from lending.
“What is clear from the two periods, 2022 and 2021 of course the banks have posted very significant rise in profits and what we see is that I think over 50 percent of that is coming from investment in government securities.”
“And part of the big investment in government securities had come during the Covid period where essentially risks were heightened, banks were really pulling back from lending and the efforts that the Bank of Zambia made was to say that you must make sure that the financial sector is protected and the banks also support firms,” Dr. Chipimo stated.
He added that the Central Bank has been very clear with commercial banks that the financial sector has to support the real economy in order for the country to grow.
Meanwhile, Dr. Chipimo revealed that the Central Bank is currently engaging commercial banks to make them understand that over reliance on government profits is a risk for them because yield rates may collapse.
“What we are telling commercial banks is that this reliance on government profits is actually a risk and this is an active engagement we are having with them because the efforts that government is making, these yield rates will collapse and then the banks will have to come back to businesses and individuals to make money.”
“So it’s a very important issue which we recognize and it’s a very significant conversation which we are having with the banks,” he added.