Policy Watch

Zambia Monetary Policy Statement


Bank of Zambia decided to keep its policy rate unchanged at 12.5%.

Debt vs GDP / Bonds vs bills

All Data - Zambia

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 24.94 26.82 30.51 - - -
Total Outstanding Amount (Billion US$) 2.47 3.05 - - - -
Bonds 1.25 1.42 - - - -
Bills 1.22 1.63 - - - -
Outstanding Amount/GDP (%) 9.91% 11.38% 0.00% - - -

Country Summary

Zambia’s financial markets are thin and underdeveloped; it is comprised of commercial banks, non-bank financial institutions, pension funds, insurance firms and the capital markets. The Central Bank, the Bank of Zambia (BoZ) is the regulatory authority of both banks and non-bank financial institutions.

Zambian banks are well capitalized and profitable. At the end of May 2014, they recorded a total capital adequacy ratio of 23.8%, well above the statutory requirement of 10%. As of 2014, there were 300 branches and 52 agencies (295 and 50 respectively at the end of 2013).  Non-banking institutions registered a satisfactory performance, with a capital adequacy ratio of 26.3%, well above the prudential limit of 10%.

The sector is hampered by a low intermediation rate. According to the 2009 Finscope, 62.7% of the adult population does not have access to financial services. Other obstacles faced by the sector are the high interest rates averaging 20%, and a low public confidence. In 2011 and 2012, the financial services contributed to a little less than 15% of GDP (agriculture, construction and tourism in 2012 were the real drivers of the economic growth).

In 2004, the government launched the Financial Sector Development Plan (FSDP). Its objective was to procure a “stable, sound, market based financial system that would support efficient resources mobilization necessary for economic diversification and sustainable growth”. Among the major achievements of the first phase of the FSDP was the establishment of a proper financial regulatory framework: legislation was amended (Banking and Financial Services Act, Securities Act, Pension Scheme regulations or Insurance Act) and a strategy for the operationalization of the Securities & Exchange Commission (SEC) was formulated.

The insurance and pension fund industries are relatively new. They are both regulated by a single body, the Pension Insurance Authority (PIA). The latter was instituted by the Pension Scheme Regulations Act No.28 of 1996 and the Insurance Act No.27 of 1997. Between Q1 and Q2 of 2013. Pension firms invested 31% of their net assets (worth ZMW 3,789 million) in fixed-income securities.

The Zambia’s capital markets are among the most promising of the Southern Africa region. Between March 2014 and 2015, the Lusaka Stock Exchange (LuSe) recorded a slightly negative performance, -2.76%. Market capitalization at the end of April 2015 was USD 8.86 billion or 21.5% GDP. 

The Banking and Financial Services Act (BFSA) of 1994 (amended in 2000) and the Securities Act of 1993 regulate the capital and money markets. The SEC under the Securities Act, Chapter 354 of the Laws of Zambia regulates the securities market.

The local bond market developed in tandem with the money market. The BoZ has instituted a number of measures to improve and maximize the impact of the local bond market on the broader economy. For instance, in June 2013, the government launched a derivatives and bond exchange (BADEX) that is to compete with the bond trading already taking place on the Lusaka Stock Exchange(LuSe).

Monetary policy & Public debt

The objective of the Bank of Zambia (BoZ) monetary policy is to achieve price stability. At the beginning of each year, the BoZ must adjust its monetary and fiscal policies to the macroeconomic objectives of the government that sustain the economic development of the country.  In 2014, the government tightened its monetary policy through different measures, among which:

-raising the policy rate from 9.75% to 12%

-raising the statutory reserve ratio from 8% to 14%.

-increasing the rate on the overnight lending facility rate by 10 percentage points above the policy rate.

The Monetary Policy Committee at his meeting on the 11th & 12th May 2016 decided to maintain the policy rate at 15.5%

There is no debt management policy; the first debt management strategy ever published by the government covered the years 2008-10; the strategy was based on the Medium-Term Debt Management Strategy of the IMF and the World Bank. This strategy reflects the will of the government to develop its domestic debt; currently most of the government revenues come from grants and foreign aid. In 2013, the government launched the Public Financial Management Strategy (PFMS) for the years 2013-15.

Market Structure

Market Participants


The Bank of Zambia (BoZ) is the only issuer of government debt. 

There is a very small corporate debt market with seven corporate bonds listed.

Investor base

In the t-bills segment, commercial banks were the dominant holders in June 2014, with 62.4%, followed by non-bank financial institutions (26.9%) and BoZ (10.8%). In the t-bonds market, non-bank financial instutitons were the predominant investors with 53% of bonds, followed by commercial banks with 30% and BoZ, 17.1%.  

Other intermediaries

There are Book Entry System (BES) authorized dealers.

Instruments issued

Treasury Bills

Currently, weekly Treasury bill auctions are carried out in four maturity categories, namely 91-day, 182-day, 273-day and 364-day. In 2012, the BoZ changed its issuance frequency from weekly to bi-weekly. The dates of the tenders are announced in the press. The BoZ also publishes an issuance calendar on its website at the beginning of each year.

Treasury Bonds

Since 2012, the BoZ issues T-bonds on a quarterly basis. Tenders are announced in the press in advance. Treasury bonds have the following maturities: 2 Years, 3 Years, 5 Years, 7 Years, 10 Years and 15 Years.

Average yield and time to maturity

In June 2014, the average composite yield across all tenors of t-bills was 19.4%. The weighted average composite yield on Treasury bonds was 18.1%. 

Primary market and secondary market

Primary Market

Effective 2012, a single pricing mechanism applies across all Treasury securities. Competitive and non-competitive bids are allowed.

The minimum amount to invest in competitive bids across all securities is Kwacha 30,000; any subsequent amount must be in multiples of K 5,000. Investors are allowed to submit a maximum of one bid per maturity bucket across all treasury securities.

The minimum amount for non-competitive bids is K1,000 and the maximum bid amount is K 29,000; any subsequent amount must be in multiples of  K1,000. Non-competitive bids should be carried through the Bank of Zambia agents. Investors are allowed to submit a maximum of one bid per maturity bucket (T-bills).

Secondary Market

OTC vs Exchange listed

All primary and secondary trading of government bonds takes place at the Lusaka Stock Exchange (LuSE). Treasury bills traded in the secondary market are conducted through authorized dealers, on the Book Entry System (BES).

Trades can be conducted between Monday to Friday, 8:45 AM- 4: 00PM, Monday to Friday.

Clearing, settlement and custody

The Central Shares Depository of the LuSE handles the custody of all securities (corporate and government debt and equities).

The Bank of Zambia maintains and processes all Treasury bill transactions through the BES, which is the Central Securities Depository.

Recent Developments

In April 2014, Zambia tapped the international bond markets with a USD 1 billion, 10-year issue.

Investor Protection

In a bid to protect investors and to keep current with best international practices, the LuSE has harmonized its rules with those of the Johannesburg Stock Exchange (JSE),

A set of financial laws provide good corporate governance principles: Companies Act, Securities Act and Stock Exchange listing requirements and Banking and Financial Services Act. The Securities Act is modeled on modern securities legislation and seeks to provide adequate investor protection and the maintenance of a fair, orderly, efficient and transparent market.

Guide to Buying Bonds

Procedures for market participation

The primary market for Government securities is open to all financial institutions and to the non-bank entities. The minimum amount to invest in non-competitive bids is K1,000 and the minimum amount to invest in a competitive bid is K 30,000. Bidders are allowed to participate to a maximum of one bid per maturity bucket. The administrative steps for transaction settlement are provided on the document about the rules and practices on government securities. 

There are also tender sales to the non-bank entities through authorized dealers.


Interest income on Treasury bonds is taxable at a rate of 15%.

There is no capital gains tax.

Settlement cycle

For Government bonds, settlement is done on Monday, with a settlement cycle of T+3. Similar to treasury bills, settlement of government bonds is through commercial banks’ accounts at the Central Bank. 

Market restrictions

Capital Controls

There are little to no capital controls in Zambia.

Restrictions on foreign exchange and profit repatriation

All foreign exchange controls in Zambia were removed. As a result, there is no exchange control on current or capital account transactions.  Investors are free to repatriate capital investments, interest, profit, dividends, management fees, technical fees, and royalties. However, the recent volatility of the Zambian Kwacha has seen the BoZ adopt a more restrictive foreign exchange stance. In 2012 and 2013, the government instituted two new regulations (Statutory Instruments 32 and 33) aimed at monitoring the flows of foreign currency in the country.

Credit rating

In May 2015, Moody's confirmed Zambia B1 rating but changed its outlook from table to negative; Fitch affirm B rating and S&P B+.

List of Primary Dealers

The list of dealers authorized by BoZ is as follows:

Documents & Resources