P t - Bank of Zambia · experiencein resou rcesandpeoplemanagemen t.Hehasb road internationalexposu...

A N N U A L R E P O R T 2 0 1 8BANKOFZAMBIA

ANNUALREPORT2018

Percent

Vision iiMission Statement iiBoard of Directors iiiSenior Management as at 31 December 2018 viiGovernor's Overview xiStatement on Corporate Governance xv

1.0 Developments in theGlobal Economy 1

2.0 DomesticMacroeconomicDevelopments 42.1 Monetary Developments and In�lation 42.2 Financial Markets 102.3 Balance of Payments 132.4 External Debt 182.5 Fiscal Sector Developments 192.6 Real Sector Developments 22

3.0 Financial System Regulation and Supervision 273.1 Banking Sector 273.2 Non-Bank Financial Institutions Sector 35

4.0 Banking, Currency and Payment Systems 484.1 Banking 484.2 Currency 484.3 Payment Systems 51

5.0 Regulatory and Other Financial Sector Developments 576.0 Strategy and Risk Management 607.0 Human ResourceManagement 628.0 Bank of Zambia Financial Statementsfor the Year Ended 31 December 2018 659.0 2018 Annual Statistical Annexures 118

TABLEOFCONTENTS

i

Head Of f iceBank of Zambia, Bank Square, Cairo RoadP. O. Box 30080, Lusaka, 10101, ZambiaTel: + 260 211 399300Fax: + 260 971 270090/0963884820E-mail: [email protected]: www.boz.zm

Regional Of f iceBank of Zambia, Buteko Avenue,P. O. Box 71511, Ndola, ZambiaTel: + 260 212 399600Fax: + 260 971 270120/0963 885580E-mail: [email protected]: www.boz.zm

REGISTERED OFFICES

To be a dynamic and crediblecentral bank that contributesto the economic developmentof Zambia

To achieve and maintain priceand financial system stability tofoster sustainable economicdevelopment

VISION MISSION STATEMENT

ii

Dr.DennyH.KalyalyahasbeenGovernorof theBankof ZambiaandChairperson of the Board of Directors since February 2015. Prior tothis appointment, he served asExecutiveDirector at theWorldBankGroup (WBG) from 2012 to 2014 and as Alternate ExecutiveDirector from 2010 to 2012, representing Africa Group 1Constituency comprising 22 countries. Dr. Kalyalya also served asDeputy Governor – Operations at the Bank of Zambia from 2002 to2010andasDirector–Economics from1998to2002.

He holds a PhD in Economics from the University ofMassachusetts/Amherst, USA (UMASS) which he obtained in 1993on a Fulbright Hays Scholarship. He also holds a Master of Artsdegree in Economics from UMASS. In addition, he holds a Master ofArts in Economics and a Bachelor of Arts in Economics from theUniversityofZambia (UNZA).

Prof. Hellicy C. Ng'ambi is a full professor of business leadership.She is currently the Vice Chancellor at Mulungushi University andKwameNkrumahUniversity.

She has worked in various management positions in institutions ofhigher learning such as the University of Botswana, University ofSouth Florida and University of South Africa. She was previouslyPrincipal and Managing Director of the Academy of BusinessManagement in Botswana, a private university college she founded.She is also one of the pioneers of the Thabo Mbeki AfricanLeadership Institute.

Shewas thewinnerof theCEOAfrica'smost in�luentialwomenof theyear in government and business Awards for two consecutive yearsand the 2017 Continental Lifetime Achiever Award. She hasauthored, edited and published several articles in journals and bookchaptersandbooks.

Prof. Ng'ambi holds a Doctorate in Business Leadership, a Master of Science in Management, a Master ofBusiness Administration, a Bachelor of Arts Degree in Economics, Chartered Institute ofMarketing Certi�icate,International Teachers' Programme Certi�icate, and an American Council on Education certi�icate. She is acerti�iedchangemanagementexpert.

iii 1All members of the Board are non-executive with the exception of the Chairperson

BOARDOFDIRECTORS1

Mr. Bryson Mumba is a corporate governance, �inancial andbusiness management expert. He is currently the Executive Dean –School of Business, Economics and Management at the University ofLusaka.Mr.Mumbastartedhis careeratZambiaConsolidatedCopperMines (ZCCM) in 1985. Other institutions he has worked for includeDeloitte & Touche (UK and Zambia), University of Abertay (Dundee,Scotland), Institute ofDevelopmentManagement (Botswana), PublicEnterprise Evaluation Agency (Botswana), National Road FundAgency(Zambia)andZambiaDailyMailLimited.

He served as an external member of the Bank of Zambia's Audit andFinance Board Committee from 2016 to 2018 and has served onseveralotherboardsandcommittees.

Mr. Mumba is a Fellow of the Association of Chartered Certi�iedAccountants (ACCA), the Zambia Institute of Chartered Accountants(ZICA)and the InstituteofDirectors (IoD),Zambia.

He holds a Master of Business Administration from Edinburgh Business School at Heriot Watt University, aMaster of Accountancy from the University of Dundee, a Bachelor of Science in Computer Studies fromLoughborough University of Technology, a post graduate diploma in Teaching/Lecturing Methodology fromUniversity of Lusaka, aDiploma in CorporateGovernance fromACCAand aPostgraduateCerti�icate in BusinessResearchMethods fromHeriotWatt University. He is currently pursuing a PhD in Accounting and Finance fromUniversityofLusaka.

Mr. Mwila Lumbwe is a director at Investment and ManagementSolutions Limited, a consultancy �irm offering investment advisoryservices to clients considering inward investment in Zambia and theSADCregion.

His expertise has been applied in different sectors at various boardand management positions in organisations including ZambiaRevenue Authority, Zambia National Commercial Bank, StandardChartered Bank and the Commission of Enquiry on the ZambiaNational Building Society. He has carried out forensic investigations,served as LiquidationManager of Credit Africa Bank Zambia Limitedand National Home Stores, and was the Receiver of Kapiri GlassProductsLimited.

Mr. Lumbwe was one of the team leaders on the ZCCM/GRZnegotiating team that presided over the privatisation of the miningindustry in Zambia and led the privatisation of the trade sector. Heserved as �inancial advisor to the Attorney General in the dissolution of the Central African Power Corporation.He further servedas theManagingPartnerofErnst&YoungZambia,whichheestablished. Prior to this, hewasaPartneratKPMGZambiaandUK.

He is a Fellow of the Association of the Chartered Certi�ied Accountants and the Zambia Institute of CharteredAccountants.

iv

BOARDOFDIRECTORS

v

Dr. Andrew Mwaba is an economist in International Developmentand Finance. He is an expert in policy review and strategy and hasexperience in resources and people management. He has broadinternationalexposure inbusiness inAfricaandbeyond.

Dr. Mwaba worked at the African Development Bank for over 30years where he held various management portfolios. He began as ayoung professional and rose through the ranks to PrincipalEconomist, Advisor to the Vice-President, Head Economist, DivisionManagerand �inally asCountryManager inMalawi.Hehasauthored,supervised and published several research papers and articles injournals.

He holds a Doctorate Degree in Development Studies from theUniversity ofManchester, aMaster of Science Degree in AgriculturalEconomics and Agribusiness Management from Ohio StateUniversity, a Master of Public Administration (Economic PolicyManagement) from Columbia University and a Bachelor of ArtsDegree inEconomics fromtheUniversityofZambia.

Ms. Namucana C. Musiwa is a Human Resource ManagementPractitioner and is the founder and Chief Executive Of�icer of CareerProspects Limited, a Human Resources Development Practice andManagement �irm. She is Chairperson of the ZIHRM Women'sNetwork and is serving as Chairperson of the University of ZambiaCaretakerCommitteeofCouncil.

Ms. Musiwa's career spans over 30 years, having worked in variouscapacities in organisations such as Boart Longyear Zambia Limited,Prince Construction CompanyLimited and the International LabourOrganization.

In May 2009, she was elected President of the Zambia Institute ofHumanResourceManagement (ZIHRM), the �irstwoman tohold theposition. She served as external member of the Bank of Zambia'sAppointment and Remuneration Board Committee from 2016 to2018. She was the �irst Board Chairperson of the ZambiaQuali�icationsAuthority.

Ms. Musiwa holds a Bachelor of Arts Degree in Public Administration from the University of Zambia and is aFellowof ZIHRM. She holds several national and international awards including twoGlobal HRLeadership andAchiever Awards conferred on her by the Africa-India Summit under the auspices of the World HumanResourceDevelopmentCongress.

BOARDOFDIRECTORS

vi

Ms. Roseta Mwape Chabala is a business strategy expert. She iscurrently theManagingDirectoratMetalFabricatorsofZambia.

Her career spans over 12 years, having served as a businessconsultant at Independent Management Consulting Services. Shelater moved to take up the position of Chief Executive Of�icer atZambia Association of Manufacturers. She played a leading role inimproving the image, multiplying the membership and revenues ofthe Zambia Association ofManufacturers. In 2013, shewas awardedfor her distinguished contribution to private sector development bythe Ministry of Commerce, Trade and Industry through the PrivateSectorReformProgram.

Ms. Chabala holds a Master of Science in International Trade Policyand Trade Law from Lund University and a Bachelor's Degree inEducation from theUniversity of Zambia. She is currently pursuing aMaster of Business Administration from the Eastern and SouthernManagement Institute.

Mr.FredsonK.Yambahas been the Secretary to theTreasury andanex-of�icio on the Bank of Zambia Board since 2011. Before beingappointed Secretary to the Treasury, Mr. Yamba served as Director -Research, Consultancy and Development Division at the NationalInstitute of Public Administration (NIPA). He also served as Directorand Chief Economist at the Ministry of Commerce, Trade andIndustry. Earlier, Mr. Yamba held several senior positions at theMinistryofFinanceandNationalPlanning including:ActingDirector-Budget Of�ice, Chief Budget Analyst, Principal Budget Analyst andSenior Budget Analyst. He was also a secondary school teacher forvariouscommercial subjects.

He holds a Master of Science Degree in Development Finance fromthe University of Reading in the United Kingdom, Bachelor of Arts inEconomics and Public Administration from the University of Zambiaaswell as aDiploma inSecondarySchoolTeaching fromtheTechnicalVocationalTeachersCollege inLuanshya.

BOARDOFDIRECTORS

vii

SENIORMANAGEMENT ASAT 31 DECEMBER2018

DR.DENNYH.KALYALYA,

GOVERNOR

DR.BWALYAK. E.NG'ANDU

DEPUTY GOVERNOR -OPERATIONS

DR. TUKIYAKANKASA-MABULA

DEPUTY GOVERNOR -ADMINISTRATION

viii


DR. FRANCISCHIPIMO

DIRECTOR -ECONOMICS

DR. JONATHANCHIPILI

DIRECTOR -FINANCIAL MARKETS

MS.GLADYSMPOSHA

DIRECTOR -BANK SUPERVISION

MS. FREDATAMBA

DIRECTOR - NON-BANKFINANCIAL

INSTITUTIONSSUPERVISION

MR.VISSCHERBBUKU

DIRECTOR -REGIONAL OFFICE

MR. LAZAROUSKAMANGA

DIRECTOR - BANKING,CURRENCY AND

PAYMENT SYSTEMS


MS.NAMWANDINDHLOVU

DIRECTOR BOARDSERVICES

DR. LEONARDN.KALINDE

DIRECTOR -LEGAL SERVICES

MR.DAVID C.MWAPE

DIRECTOR -RISK AND STRATEGY

MS. PRUDENCEMALILWE

DIRECTOR - FINANCE

MR. FABIANHARA

DIRECTOR -INTERNAL AUDIT

MS.REKHAC.MHANGO

DIRECTOR -HUMAN RESOURCES

ix

x


MS.MWABAKASESE

ACTING DIRECTOR -INFORMATION ANDCOMMUNICATIONSTECHNOLOGY

MR.EVANSLUNETA

DIRECTOR -PROCUREMENT AND

MAINTENANCE SERVICES

Governor 's Overview

xii

This report reviews global and domestic macroeconomic developments in2018 and the role the Bank of Zambia played in ful�illing its primarymandate of price and �inancial system stability. In addition, the reportpresents audited �inancial statements of the Bank for the year ended 31stDecember2018andprovidesstatistical annexures.

Monetary policy in 2018 continued to focus onmaintaining price stability,by ensuring that in�lation remained within the target range of 6-8%. TheBank relied on the Policy Rate as a key signal for itsmonetary policy stance.Decisions on themonetary policy stancewere guided by themedium-termin�lationoutlookaswell asabroadersetofmacroeconomic indicators, suchas, the outturn in in�lation, credit conditions, economic growth, �inancialsector stability, and risks to in�lation. The Bank continued to use marketbased monetary policy instruments to maintain the 5-day interbank ratewithin+/-1percentagepointaroundthePolicyRate.

In�lation on average was higher in 2018 than in 2017, but was maintained broadly within the target rangeduring theyearexcept inAugust andOctoberwhen it breached theupperboundof the target range.However, bythe end of the year, it reverted to the target range and closed 2018 at 7.9%. The build-up in in�lationarypressures was mainly on account of rising food prices, exchange rate depreciation, and upward adjustment offuel pumpprices. Afteraperiodof successive easingofmonetarypolicy that started in2017, thePolicyRatewaslowered to 9.75% in February 2018 from 10.25% and was maintained at that level for the rest of the year. Inaddition, the statutory reserve ratio was adjusted downwards to 5.0% from 8.0% andwas held at that level forthe remainder of the year. The Bank considered this policy stance appropriate in maintaining in�lation withinthe6 -8%targetbandaswell as supportingprivatesectorcreditgrowthandeconomicactivity.

Market liquidity conditions improved as monetary policy remained accommodative. Consequently, theovernight interbank rate closed the year slightly lower at 9.88% from 9.94% in December 2017. This was wellwithin thePolicyRate corridor.

Broad money grew at a slower pace in 2018 than in 2017 owing to a slowdown in domestic credit growthbrought aboutby themoderation in expansionof lending toGovernment. However, credit toprivateenterprisesand households picked up. Commercial Banks lending rates, although exhibiting a declining trend, remainedelevated in 2018, re�lecting in part, high yields on Government securities, high cost of wholesale funds, andelevatednon-performing loans.

Yield rates on Government securities increased mainly on account of low demand and a higher risk premiuminduced by sovereign credit rating downgrades during the year. However, the outstanding stock of Governmentsecurities rose by 20.7% to K58.3 billion as at end-December 2018, due to private placements of Governmentbonds toselected institutions.

Zambia's external sector performance in 2018was unfavourable,with the country recording an overall balanceof payments de�icit of US $387.8 million against a surplus of US $18.3 million in 2017. This was largely onaccount of the unfavourable performance in the �inancial account which more than outweighed theimprovements in the current and capital accounts. The �inancial account registered ade�icit against a surplus in2017 mainly on account of a marked reduction in direct investment in�lows and net portfolio investmentout�lows. The current and �inancial account de�icitsweremainly �inancedbyadrawdownof gross internationalreserves.

GOVERNOR'SOVERVIEW

Thecountry's international reserves continued todeclinedue tohighexternaldebt servicepayments.Asat end-December 2018, gross international reserves declined to US$1.6 billion, equivalent to 1.8 months of importcover, from US $2.1 billion in 2017 (2.9 months of import cover). The decline in reserves was moderated bypurchases of US$346.0 million from the market and mineral royalty payments by the mines amounting to US$134.9million in2018.

Global growth remained positive, although it slowed down to 3.7% in 2018 from 3.8% in 2017 driven bysubdued economic activities in advanced and some emerging market economies. In the Sub-Saharan Africa(SSA) region, growth remained unchanged explained by themixed performance in some of the region's largesteconomies,Nigeria, SouthAfrica, andAngola.

Domestic economic activity picked up in 2018, with preliminary data indicating higher growth in real GDP at3.7%, from 3.5% in 2017. The increase in growth was supported by strong performance in the mining,manufacturing,wholesaleandretail trade, and informationandcommunicationssectors.

On the �iscal side, preliminary estimates indicate that the �iscal de�icit at 7.6% of GDP was above the target of6.1%, largely re�lecting higher than programmed spending on capital projects and interest payments onexternal anddomestic debt. Fiscal consolidation thus remains a critical imperative formacroeconomic stabilityandhighereconomicgrowth.

Theoverall performanceof thebankingandnon-banking �inancial institutions sectors remainedstable in2018.However, the �inancial sector as awhole continued to be adversely affected by the high ratio of non-performingloans to total loans at 11.0%,whichpersistently stayed above themaximumprudential limit of 10.0%althoughitdeclinedduring theyear.

The Bank continued to undertake legal and regulatory reforms aimed at aligning its supervisory frameworkwith international best practice. Oneof the keydevelopments that tookplace in 2018was the coming into effectof the revisedBanking andFinancial ServicesAct, No. 7 of 2017,which enhanced theBank's capacity to addresschallenges in the �inancial sector, particularly in areas, such as, consumerprotectionand corporate governance.The Bank launched banknotes with enhanced security features during the year with the aim of protecting theZambian currency from counterfeiting and safeguarding the integrity of the currency. TheBank also undertookvarious initiatives to increase formal �inancial inclusion aimed at improving living standards of the peoplegenerally. Advances in the use of �inancial technology continued to enhance access to �inancial services, asre�lected in the rising volume of transactions onmobilemoneyplatforms. In this regard, the Bankwill continueto implement policies and interventions that promote the use of digital �inancial services to enhance �inancialinclusion.

In the comingyear, theBankwill continue to implement the2016-2019StrategicPlananddeliveron itsprimarymandateofmaintainingpriceand �inancial systemstability.

DRDENNYH.KALYALYAGOVERNOR

xiii

Statement on Corporate Governance

xv

TheBankof ZambiaBoardofDirectors is fully committed toupholding the tenets of good corporate governancein itsprocessesandprocedures,which includeaccountability, transparencyand integrity.TheBoardofDirectorsof theBankofZambia is establishedunder theConstitutionofZambia (Amendment)Act2

number 2 of 2016. The Board is vested with all the powers of the Bank under the Bank of Zambia Act3 and isresponsible for formulating its policies. TheActprovides for eightBoardmembers comprising theGovernor, sixNon-Executive Directors (NEDs) and the Secretary to the Treasury, who is an ex-of�icio. The Governor is theChiefExecutiveOf�icerof theBankandChairpersonof theBoard.

After the expiry of the tenure of the previous Board members in June 2018, the following were appointed asNEDs to theBoard inSeptember2018:

i. Prof.HellicyC.Ng'ambi (ViceChairperson);ii. Ms.NamucanaC.Musiwa;iii. Ms.RosetaM.Chabala;iv. Dr.AndrewMwaba;v. Mr.BrysonMumba;andvi. Mr.MwilaLumbwe

In 2018, the Board held three statutory and three special meetings during which a number of issues werediscussed. In addition, the following policies were approved: The Green Policy, Sexual Harassment Policy,NepotismPolicy,RevisedLenderofLastResortPolicy, andEmployeeResourcingandRetentionPolicy.The Board has three standing committees namely; Audit and Finance; Appointments and Remuneration; andGovernanceandRiskwhoserolesand functionsarede�ined in theCommitteeCharters. Thecommitteesmeetatleastonceaquarter.Themembersof theCommitteesare:

Audit andFinanceCommitteeMr.BrysonMumba ChairpersonMr.MwilaLumbwe NEDDr.AndrewMwaba NEDMs.RosetaM.Chabala NEDMr.FredsonK. Yamba Ex-Of�icio

GovernanceandRiskCommitteeMr.MwilaLumbwe ChairpersonProf.HellicyNg'ambi NEDMs.NamucanaMusiwa NEDMr.BenNgenda ExternalMember

AppointmentsandRemunerationCommitteeMs.NamucanaMusiwa ChairpersonProf.HellicyNg'ambi NEDMs.RosetaM.Chabala NEDMr.BrysonMumba NED

STATEMENT ONCORPORATEGOVERNANCE

2Article 213 (3) of Act No. 2 of 20163Bank of Zambia Act Chapter 360 of the Laws of Zambia

To facilitate consultation, promote transparency and provide advice to the Bank onmonetary policy, the Boardhas also established theMonetary Policy Advisory Committee. This Committee approves the Bank's bi-annualMonetaryPolicyStatement.

The Bank continues to support various humanitarian, community, educational, environmental, sporting andhealth-related activities as part of its corporate social responsibility. In 2018, the Bank disbursed a total ofK792,277.10 to provide support to the health sector, educational institutions, heritage and conservation,orphanagecareandsupport toHabitat forHumanityZambia.

xvi

Assistant Director - Communications, Mr Kanguya Mayondi at the handover ceremony for computers donated by the Bank to BulunguSchool in Mumbwa

Developments in the Global Economy1.0

1

1.0 DEVELOPMENTSINTHEGLOBALECONOMYWorldEconomy

Preliminary data indicate that global growth remained positive, although it slowed down to 3.7% in2018 from 3.8% in 2017 (Table 1.1). The decline was mainly on account of subdued economicactivities in advanced economies and some emerging market and developing economies.Uncertainties surrounding Brexit negotiations, coupled with the anticipated negative effects of theUS China trade war and tightening global �inancial conditions, contributed to the slowdown ingrowth.However, growth in theSub-SaharanAfrica (SSA)regionremainedunchanged in2018.

AdvancedEconomies

Economic growth in advanced economies declined to 2.3% in 2018 from 2.4% in 2017 mainly onaccount ofweakening growth in the euro area and theUnitedKingdom(UK). Growth in the euroareawas weighed down mainly by faster-than-expected slowdown in Germany, France and Italy. Newautomobile emission standards4 and softer external demand weighed on industrial production andprivate consumption in Germany, while street protests and industrial action by labour unions hurteconomic growth in France. In Italy, sovereign and �inancial concerns negatively affected domesticconsumption.

The slowdown of growth in the UK was largely due to the continued uncertainties surroundingBrexit. However, the United States (US) registered higher growth in 2018, mainly supported byexpansionary �iscal policy, increased private investment and continued strong consumer andbusinesscon�idence.

EmergingMarketsandDevelopingEconomies

Growth in Emerging Markets and Developing Economies (EMDEs) declined to 4.6% in 2018, from4.7% in2017,mainly on account ofweakening growth inChina. Growth in Chinadeclined to6.6% in2018, from6.9%in2017 largelydue toeffectsof theUS-China tradedisputesanddomesticmeasurestoaddressexcessivecorporatedebt implementedby theChineseauthorities.

4The new standards led to some car makers to either suspend or ultimately stop manufacturing some car models which were previouslyconsidered tohave lowemissionsand fuelef�icient

WorldAdvancedEconomiesUnited States

EuroArea

United Kingdom

EmergingMarketsandDevelopingCountriesChina

Sub-SaharanAfrica (SSA)SouthAfrica

Angola

Nigeria

Zambia

20163.21.71.5

1.8

2.4

4.46.7

1.40.3

-0.7

-1.6

3.8

RealGDP InflationTable1.1:WorldRealGDPand Inflation, 2016-2018 (Annual%changeunlessotherwise stated)

Source: Focus Economics,Trading Economics,World Bank, IMFWEOOctober 2018 and January 2019WEO update, Central StatisticalOffice (CSO)* Preliminary

20173.82.42.2

2.4

1.8

4.76.9

2.91.3

-0.1

0.8

3.5

2018*3.72.32.9

1.8

1.4

4.66.6

2.90.8

-2.9

1.9

3.7

2016n/a0.82.1

1.1

1.6

4.32.0

11.36.3

32.4

15.7

7.5

2017n/a1.72.1

1.4

3.0

4.31.6

11.05.3

31.7

16.5

6.1

2018*n/a2.02.4

1.8

2.1

4.91.9

8.64.5

20.3

12.1

7.9

2

Sub-SaharanAfrica

Growth in the SSAregion remainedunchanged at 2.9% in2018as global growth, trade and industrialactivity lostmomentum. Further, the 2018outturnwas explainedby themixedperformance in someof the region's largest economies, Nigeria, South Africa, and Angola. Growth in Nigeria picked up onaccount of favourable performance in the non-oil and services sectors. In South Africa, growth isestimated to have slowed down due to weak consumer and business con�idence as well as delays inimplementing themuch anticipated structural policy reforms,while Angola recorded a recession onaccountof loweroilprices.

MonetaryPolicyandInflation

Monetary policy continued to be broadly accommodative in major central banks and in�lationdynamics were mixed across regions in 2018. In advanced economies, and emerging markets anddeveloping economies, in�lation continued to trend upwardsmainly due to stronger performance inthe labourmarkets that resulted in higherwages and increases in oil prices. The US Federal Reserveraised the federal funds rate for the fourth time in2018by25basispoints to2.25-2.5%on thebackofsolid economic growth and strong labour market. In�lation in the US ended the year at 2.4% from2.1% in 2017. In the Eurozone, the European Central Bank (ECB) maintained the main re�inancingrateat0.00%,despite in�lationclosinghigher in2018at1.8%compared to1.4%in2017.

In the SSA, in�lation declined largely due to continued strengthening of domestic currencies andcontinued recovery in some commodity prices. The South African Reserve Bank increased itsbenchmark repo rate by 25 basis points to 6.75% in the last quarter of 2018, to counter in�lationarypressuresandexpectations. In�lationended theyearat4.5%,downfrom5.3%in2017.

CommodityPrices

The average price of copper rose by 6.4% to US$6,565.3/metric tonne (mt) in 2018 fromUS$6,170.0/mt recorded in 2017, mainly on account of improved global demand. Crude oil pricesalso increased to US$68.8/barrel on average from US$53.1/barrel in 2017. This was mainlyattributed to sustained supply cuts by OPEC and non-OPECmembers, renewedUS sanctions againstIran and continued positive global economic growth. Generally, agricultural commodity pricesincreased in2018due todroughts inEuropeandCentralAsia, coupledwith an increase in fuel prices.In particular, maize prices, at an average of US$164.4/mt in 2018, were higher than US$154.5/mtrecorded in 2017. Similarly, wheat prices, at an annual average of US$203.9/mtwere higher than US$178.2/mtrecordedover thesameperiod.

ImplicationsofGlobalDevelopmentsontheZambianEconomy

The slowdown in growth in Zambia's major trading partners5 is likely to dampen demand forZambia's export commodities. In particular, lower growth in China is likely to depress copper pricesandmoderategrowthof exportearnings forZambia.

5Zambia' major trading partner countries with their respective trade weights are South Africa (0.426), Switzerland (0.319), EU (0.093), China(0.077), andUK(0.069).

MacroeconomicDevelopments in Zambia

2.0

4

2.0 DOMESTICMACROECONOMICDEVELOPMENTSIn 2018, Government's macroeconomic objectives as outlined in the National Budget were, amongothers, to:

i. AchieverealGDPgrowthofat least5.0%;ii. Maintainsingledigit in�lationwithin therangeof6.0%to8.0%;iii. Maintain international reservesofat least3monthsof import cover;iv. Limit the �iscalde�icit, onacashbasis, to6.1%ofGDPandv. Limitdomestic �inancing tonomore than4.0%ofGDP.

Preliminary estimates indicate that the economy grew by 3.7% in 2018 compared to 3.5% in 2017,butwas lower than the targetof 5.0%.Thegrowth in realGDPwasdrivenby favourable performancein thewholesale and retail trade,manufacturing,mining aswell as information and communicationssectors. In�lation remained broadly within the target range, although it was on average higher in2018 than in2017, due topass-througheffects of exchange ratedepreciation, coupledwith fuel priceincrements. International reserves remainedbelow the target of 3-months' import covermainly dueto external debt service payments. With regard to the �iscal performance, preliminary estimatesindicate that the �iscal de�icitwas above target, largely re�lecting higher spending on capital projectsand interestpaymentsondomesticandexternaldebt.

2.1 MONETARYDEVELOPMENTSANDINFLATION

MonetaryPolicyStance

In 2018, monetary policy was aimed at maintaining in�lation within the target range of 6-8%. Theformulation of monetary policy continued to be guided by the medium term in�lation outlook andin�lation outcomes as well as a broader set of macroeconomic indicators such as credit conditions,economic growth, the stance of �iscal policy, �inancial sector stability and risks to in�lation. Within�lation remaining broadly within the target range, monetary policy remained accommodativeduring theyear.

After a period of successive easing of monetary policy that started in 2017, the Policy Rate waslowered to 9.75% in February 2018 from 10.25%, and was maintained at 9.75% for the rest of theyear. With in�lation remaining within the 6 - 8% target range, the monetary policy stance remainedunchanged for the rest of the year to boost private sector credit, and support economic activity andstability of the �inancial sector. Thiswas despite a build-up in in�lationary pressures emanating fromexchangeratedepreciation, fuelprice increasesandarelatively lowermaizeharvest.

The statutory reserve ratiowas also reduced from8.0% to5.0% andwasmaintained at that level forthe rest of the year. This was in an effort to strengthen the current monetary policy framework thatfocuseson thePolicyRateas theanchor for signalling thepolicy stance.

Further, the Bank continued to conduct openmarket operations aimed atmaintaining the interbankrate within +/-1 percentage point of the Policy Rate in order to align market interest rates to thePolicyRate.

ChallengestoMonetaryPolicyImplementation

The effectiveness of monetary policy continued to be constrained by a number of factors. Thecontinued �iscal de�icits and consequent high Government borrowing from the domestic �inancialmarket have had a crowding out effect on private sector credit. As a result, economic activity hasremained subdued as the productive sectors of the economy could not access affordable credit. Inaddition, the continued high lending to Government kept yield rates on Government securitieselevated, resulting in lending interest ratesremaininghigh.

Vulnerabilities in the �inancial sector associated with high non-performing loans continued tohamper theeffectivenessofmonetarypolicy. Further, thedecline in international reservesdue tohighexternal debt service payments remained a threat to the stability of the exchange rate, of the Kwachaagainst theUSdollar withpotential adverseeffectson in�lation.

MoneyMarket LiquidityandInterbankRate

Interbank money market liquidity, as measured by the aggregate current account balance ofcommercial banks slightly improved in 2018, closing the year at K1.42 billion from K1.37 billion theprevious year (Table 2.1). Market liquidity was mainly supported by net maturities of Governmentsecurities, BoZ foreign exchange purchases6 for international reserves accumulation and netGovernment spending. These in�luences were, however, countered by statutory reserves transfersandOvernightLendingFacility (OLF) repayments.

Given the increase in market liquidity, the overnight interbank rate closed the year lower at 9.88%compared to9.94%at end-December2017, andwas containedwithin thePolicyRate corridor (Chart2.1).

The volume of funds traded in the interbank money market increased to K82.2 billion from K51.5billion in2017, despite the increase inmarket liquidity (Chart 2.2). Amounts accessedby commercialbanks using the OLFwindow rose toK20.9 billion fromK16.6 billion in 2017. Thiswasmainly on theback of sustained concentration of funds amongst a few banks with limited credit lines. However,commercial banks' access of foreign exchange swap contracts marginally fell, with the outstandingswapsclosingatK2.3billion fromK2.4billion in2017.

OpeningbalanceNetGovt spending

BoZ FX Purchases/sales

CIC

SR deposits

OLF

NetGovt Sec Maturities/sales

Openmarket operations

Other*

Closingbalance

20162.456.01

7.65

-0.39

-4.31

-7.54

1.74

0.25

-4.72

1.14

Table2.1Liquidity Influences(K' Billion), 2016 - 2018

Source: Bank of ZambiaNote: FX=foreign exchange; CIC=currency in circulation, SR=statutory reserves, OLF=Overnight Lending Facility*Other includes miscellaneous transactions and net inter-bank fund transfers

20171.144.10

3.44

0.10

-3.95

-0.34

-2.62

0.04

-0.54

1.37

20181.371.58

3.85

-0.70

-7.96

-4.10

5.66

0.54

1.18

1.42

CHART 2.1:MarketLiquidity andInterbank rate,Dec 2015 –Dec 2018

Source:Bank of Zambia

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

-

5.00

10.00

15.00

20.00

25.00

30.00

31-Dec-15

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Mar-18

30-Jun-18

30-Sep-18

31-Dec-18

Percent

K’billion

Excess Reserves(K'bn)(RHS) 5-day Moving-Ave (LHS) BOZ Policy Rate (LHS)Lower Bound (LHS) Upper-Bound (LHS) Interbank Rate (LHS)OLF Rate(LHS)

6TheBankof ZambiapurchasedUS$346million from themarket forpurposesof international reservesaccumulation andno salesweremade formarket support.

5

BroadMoney

The annual growth in broad money (M3)7 slowed down to 16.5% in 2018 compared to 21.4% in2017, mainly on account of slower growth in domestic credit following a slowdown in credit toGovernmentandpublicenterprises (Chart2.3andTable2.2).

DomesticCredit

Growth in domestic credit9 was lower at 15.0% in 2018 compared to 26.3% in 2017. The slowdownincredit toGovernmentandpublic enterprisesaccounted for thisoutturn (Chart2.4).

63.1

77.1 76.0

51.5

82.2

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2014 2015 2016 2017 2018

K'billion

CHART 2.2:InterbankMoney MarketTradingActivity(K’billion),2013 - 2018


CHART 2.3:Annual BroadMoneyGrowth(Percent),Dec 2015 -Dec 2018


-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

K,million

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Broad Money (M3) Annual Growth Rate

-20

-10

0

10

20

30

40

Sep-18

Oct-18

Nov-18

Dec-18

Percent

Description

BroadMoney (M3)

Of whichNet ForeignAssets

Net Domestic Assets

Gross Domestic Credit

Gross Claims onGov't

Public Enterprises

Private Enterprises

Households

NBFIs8

2016

-5.7

-24.3

23.5

2.8

22.6

-22.0

-7.7

-12.0

3.1

Table2.2:SourcesofGrowth inBroadMoney (Percent), 2016 –2018

Source: Bank of Zambia

2017

21.4

0.3

41.7

26.3

50.7

85.3

2.2

10.2

1.9

2018

16.5

13.0

18.9

15.0

12.9

18.4

14.9

19.4

89.8

Contribution tochange inM3(2018)

16.5

5.3

11.2

17.1

8.0

0.1

4.6

3.9

0.5

7Broad money includes foreign currency deposits8Non-Bank Financial Institutions9Total domestic credit includes lending by the Bank of Zambia, Commercial banks, and other Depository corporations in both Kwacha andforeign currency.6

Credit to the non-government sector, particularly to private enterprises and households, picked updue to increased demand following improved liquidity in the market, supported by theaccommodativemonetarypolicyby theBankofZambia.

Commercial banks' total loans and advances continued to register growth in 2018, drivenmainly byan expansion in both Kwacha and foreign currency denominated loans. Kwacha denominated creditexpanded by 12.3% driven by increased lending to households, �inancial services, community andsocial services, and wholesale and retail trade sectors. Foreign currency denominated creditincreased by 8.3% on the back of expansion in lending to manufacturing, mining, �inancial services,andelectricitygas,waterandenergysectors(Charts2.5and2.6).

CHART 2.4:Contributionto Annual GrossCredit Growth(Percentage),Dec 2015 –Dec 2018


-12.0

-6.0

0.0

6.0

12.0

18.0

24.0

30.0

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

GrossClaims onC. Govt Public enterprises Private enterprisesHouseholds NBFIs Gross Domestic Credit

CHART 2.5:Distribution ofCommercialBank KwachaDenominatedLoans(K'million),2017-2018


0 2,000 4,000 6,000

Credit/debit cardsRestaurants and hotelsMining and quarying

Electricity, gas, water and energyConstructionReal estate

Other sectorsFinancial services

ManufacturingTransport, storage and…

Community, social and perconal…Agriculture, forestry,Fishing and…

Wholesale and retail tradePersonal Loans

Dec-18 Dec-17

8,000

CHART 2.6:Distribution ofCommercialBank ForeignCurrency Loans(US$ million),2017-2018


0 100 200 300

Credit/debit cardsCommunity, social and perconal services

Restaurants and hotelsOther sectors

Personal LoansFinancial services

ConstructionOther sectors

Electricity, gas, water and energyReal estate

Transport, storage and communicationsWholesale and retail trade

ManufacturingMining and quarying

Agriculture, forestry,Fishing and hunting

Dec-18 Dec-17 7

Percentage

K’million

US$’million

InterestRates

GovernmentSecuritiesYieldRates

Yield ratesonGovernment securities edgeduponaccount subdueddemandanda relatively high riskpremium inducedby the sovereign credit rating downgrade10. Theweighted average composite yieldrates for Treasury bills and Government bonds rose to 18.3% and 19.1% in 2018, from 16.6% and18.8%, respectively, in2017(Chart2.7andChart2.8).

CommercialBanksInterest Rates

Commercial banks' nominal average lending rate (ALR) declined to 23.6% in December 2018 from24.6% in December 2017, mainly due to the accommodative monetary policy which supportedmarket liquidity. The180-daydeposit rate for amounts exceedingK20,000 rose to9.1% inDecember2018, from 8.6% recorded in December 2017. The average savings rate (ASR) for amounts aboveK100closed theyearat3.0%from2.8%inDecember2017(Chart2.9).

CHART 2.7:Treasury BillsWeightedAverage YieldRates (Percent),2015 – 2018


CHART 2.8:GovernmentBond YieldRates (Percent),2015-2018


14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

2-years 3-years 5-years 7-years 10-years 15-years Composite Bond Rate

10S&P, Fitch and Moody's downgraded Zambia's sovereign credit rating in 2018.8

5.0

10.0

15.0

20.0

25.0

30.0

31-Dec-15

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Mar-18

30-Jun-18

30-Sep-18

31-Dec-18

percent

91-Day 182-Day 273-Day 364-Day CompositeYield

Percent

The real ALR fell to 15.7% inDecember 2018 from18.5% inDecember 2017, following a reduction innominal interest rates (Chart 2.10). The real average 30-day deposit rate for amounts aboveK20,000fell to 1.2% from 2.5% as in�lation rose, while the real ASR for amounts exceeding K100 furtherreduced to -4.9%from-3.3%over thesameperiod.

Inflation

In 2018, annual overall in�lation was maintained broadly within the target range of 6-8%. Althoughin�lation breached the upper bound of the target range in August and October, it reverted back to thetargetbandandclosed theyear at7.9%(Chart2.11).Onaverage, overall annual in�lation rose to7.5%in2018 from6.6% in2017, on account of rising foodprices, particularly,maize grain, tomatoes, rape,onions and dried Kapenta. In addition, the depreciation of the exchange rate and the rise intransportation costs, resulting fromtheupwardadjustment in fuel prices, contributed to the increasein in�lation.

CHART 2.9:NominalLending andSavingsRates (Percent),Dec 2015 –Dec 2018


0.0

5.0

10.0

15.0

20.0

25.0

30.0

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Avg Lending Rate Savings rate (> K100) Deposit rate (> K20,000, 180-day)

Sep-18

Dec-18

CHART 2.10:Real Lendingand SavingsRates (Percent),Dec 2015 –Dec. 2018


(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Real Lending Rate Savings rate (> K100) Deposit rate (> K20,000, 180-day)

CHART 2.11:In�lation,AnnualChange(Percent),Dec 2015 –Dec 2018

Source:Central StatisticalOf�ice

0

5

10

15

20

25

30

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Overall Inflation Food inflation Non-food inflation

Sep-18

Dec-18

9

Percent

Percent

Percent

2.2 FINANCIALMARKETS

GovernmentSecuritiesMarket

MarketBiddingBehaviour

In 2018, investments in Treasury bills and Government bonds were concentrated in longer datedinstruments.Most of the investorspreferred the364-dayTreasurybills and the15-yearGovernmentbondsonaccountof relativelyhigheryield rates (Table2.3).

StockofGovernmentSecurities

A total of K25.1 billionwas realised throughGovernment securities auctions against totalmaturitiesof K23.0 billion, leading to a surplus of K2.1 billion. Consequently, the outstanding stock ofGovernment securities increased to K58.3 billion at end-December 2018, fromK48.3 billion as end-December 2017, representing an annual growth of 20.5% (Chart 2.12). The rise in the outstandingstock of Government securities was on the back of a 41.3% increase in Government bonds to K39.8billion, mainly attributed to private placements of Government bonds to selected institutions.However, the growth in the stock of Government securities was moderated by the fall in stock ofTreasurybillsby8.5%toK18.5billion.

In terms of holdings by category, commercial banks continued to hold the largest stock of Treasurybills, accounting for 76.1%. Non-bank �inancial institutionswere second at 19.6%,while the Bank ofZambiaaccounted for4.3%(Chart2.13).

91-day bills

182-day bills

273-day bills

364-day bills

TOTAL2-year bond

3-year bond

5-year bond

7-year bond

10-year bond

15-year bond

TOTAL

AmountOffered(Kbn)

1.4

3.3

4.4

8.2

17.30.3

1.1

1.6

0.3

0.6

0.2

4.0

2016 2017Table2.3. Government SecuritiesTransactions, 2016-2018

BidAmount(K' bn)

1.1

2.6

3.6

8.3

15.60.3

1.1

3.8

1.5

1.6

0.9

9.1

SubscriptionRate

(Percent)83.1

80.0

82.0

100.5

90.684.2

100.8

244.7

482.5

275.6

599.9

227.5

AmountOffered(Kbn)

1.8

3.9

5.9

11.7

23.30.4

1.2

1.9

0.6

1.1

0.7

5.9

BidAmount(K' bn)

1.7

3.7

4.9

19.0

29.30.8

2.7

4.5

0.9

2.9

2.0

13.8

SubscriptionRate

(Percent)94.4

94.9

83.1

162.4

108.5200.0

225.0

236.8

150.0

263.6

285.7

210.3

2018AmountOffered(Kbn2.0

4.2

6.2

12.4

24.70.6

2.1

2.7

0.9

2.7

0.9

9.9

BidAmount(K' bn)

1.2

1.3

1.9

13.9

18.30.4

0.7

1.6

0.8

2.3

2.5

8.3

SubscriptionRate

(Percent)63.46

31.20

29.85

112.75

74.1865.10

34.72

59.90

84.71

86.64

273.06

83.80


CHART 2.12:

K'billion),

Stock ofGovernmentSecurities,(Dec 2014 -Dec 2018


10.9 12.1 13.220.2 18.5

11.6 12.619.8

28.239.8

-

10.0

20.0

30.0

40.0

50.0

60.0

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

K'billion

T-bills Bonds

10

With regard to Government bonds holdings, non-bank �inancial institutions, particularly pensionfunds, continued tohold the bulk ofGovernment bonds. Of the total outstanding stockof Governmentbonds, non-bank �inancial institutions and commercial banks held 71.8% and 19.1%, respectively,while theBankofZambiaheld9.2%of thebonds (Chart2.14).

Non-residentHoldingsofGovernmentSecurities

The holdings of Government securities by non-resident investors declined toK8.1 billion from K8.5billion in 2017 (Chart 2.15). The decline was largely on account of negative market sentimentsemanating from Zambia's credit rating downgrades, the elevated �iscal de�icit and rising externaldebt.

CHART 2.13:TreasuryBillsHoldings(K'billion),2014 - 2018


6.0 6.0 6.6

14.21.9 1.9 0.8

0.5

4.2 4.2 5.8

5.6

-

5.0

10.0

15.0

20.0

25.0

2014 2015 2016 2017

K'billion

Banks Bank of Zambia Non-bank

14.1

0.8

3.6

2018

CHART 2.14:GovernmentBond Holdings(K' billion),2014 - 2018


1.7 1.7 3.05.6 7.61.7 1.7 1.51.4

3.69.3 9.3

15.3

21.2

28.6

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

2014 2015 2016 2017 2018

K'billion

Banks Bank of Zambia Non-bank

CHART 2.15:

US$'bIllion

Non-ResidentInvestorsGovernmentSecuritiesHoldings( ),Dec 2015 -Dec 2018


-

0.50

1.00

1.50

2.00

2.50

3.00

Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 Dec'17 Mar'18 Jun'18 Sep'18

US$'bIllion

Percent

GIR (USD) (LHS) Non-resident (USD) (LHS) Percentage ofGIR (RHS)

0

10

20

30

40

50

60

Dec'18

11

ForeignExchangeMarket

NominalExchangeRate

In nominal terms, the Kwachaweakened against itsmajor trading partner currencies in 2018, on theback of negative market sentiments emanating from the downgrade by rating agencies11 and thestrengtheningof theUSdollar.

The Kwacha depreciated by 9.8% against the US dollar, to an annual average of K10.4739/US$ in2018 from K9.5349/US$ previously (Chart 2.16). Against the Pound Sterling and the euro, the localunit depreciated by 13.6% and 14.6% to averages of K13.9510/£ and K12.3425/€, respectively.Further, the Kwacha lost by 10.4% against the South African rand to an average of K0.7908/ZAR in2018. The depreciation of the Kwacha was despite the net supply of foreign exchange amounting toUS$995.7 million. The major suppliers of foreign exchange continued to be the mining sector,followedby theconstructionsector.

Real EffectiveExchangeRate

TheKwachadepreciatedby6.2%in real termsagainstabasketofmajor tradingpartner currencies in2018. The real effective exchange rate (REER)12 index increased to an average of 113.0 in 2018 from106.4 in 2017 (Chart 2.17). This depreciation was mainly attributed to an increase in the nominaleffective exchange rate (NEER) by 11.2%, of which the South African Rand and the Swiss francaccounted for4.5and3.3percentagepoints, respectively.

CHART 2.16:Exchange Rateof Kwachaagainst majorcurrencies,2015 - 2018


0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

8

10

12

14

16

18

20

31-Dec-15

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Mar-18

30-Jun-18

30-Sep-18

31-Dec-18

USD/ZMW GBP/ZMW EUR/ZMW ZAR/ZMW(RHS)

CHART 2.17Real EffectiveExchangeRate Index,Dec 2015 –Dec 2018


-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

0

20

40

60

80

100

120

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

REER Index(LHS) %Change(RHS)

11Moody's in July, S&P inAugustandFitch inOctober.12An increase in theREER index indicatesdepreciationandagain in thepricecompetitivenessofacountry's exportsandan increase in therelativepriceof imports, andviceversa.

12

Index

Percent

CapitalMarkets

Trading activity at the Lusaka Securities Exchange (LuSE) slowed down in 2018, with the LuSE All-Share index (LASI) declining by 1.5% to 5,248.4 (Chart 2.18). The fall in the index was largelyattributed to a reduction in the shareprices of selected companies in themanufacturing, banking andservices sectors mainly due to reduced earnings. Market capitalisation fell by 3.0% to K60,493.0million. The securities exchange recorded a net out�low from equities amounting to US$5.4 million,compared toUS$2.5million in2017.The increase in thenet out�lowswas largely attributed to foreignportfolio investors that sold their shareson thebackof increasedriskaversion.

2.3 BALANCEOFPAYMENTS

In 2018, Zambia recorded an overall balance of payments (BoP) de�icit of US $387.8million13 againsta surplus of US $18.3 million in 2017 (Table 2.4). This outturn was mainly due to the unfavourableperformance of the �inancial account whichmore than outweighed the improvements in the currentandcapital accounts.

CurrentAccount

Thecurrent accountde�icit narrowedtoUS$341.4million in2018, representing1.3%ofGDP, fromUS$435.0million in 2017 (1.7%of GDP),mainly due to an improvement in the primary income account.The primary income account de�icit narrowed to US $407.0 million from US $1,144.7 millionfollowingareduction inout�lowsonaccountof lossesattributable to foreignownedenterprises.

However, the country's balance on goods narrowed on account of higher imports which more thanoutweighed the improvement inexport earnings. Thebalanceongoods surplusdeclined toUS$513.9million fromUS $960.2million in 2017. Merchandise imports grew by 17.4% to US $8,515.5million,while merchandise export earnings increased at a lower rate of 9.9% to US $9,029.4 million. Theincrease in imports was due to higher importation of chemicals, vehicles, mineral ores, industrialboilersandequipment,petroleumproductsandelectricalmachineryandequipment.

CHART 2.18Indicators ofLuSE Activity,2015 - 2018

Source:Lusaka SecuritiesExchange

52

54

56

58

60

62

64

66

68

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

K'billion

Market Capitalization(LHS) LASIAll Share Index(RHS)

0

1000

2000

3000

4000

5000

6000

7000

Dec-18

Index

13Preliminary13

14

BPM6ConceptA. Current Account, n.i.e.

Balance on goods

Goods: exports (f.o.b)

ofWhich Copper

Cobalt

NTEs

Gold

Goods: imports (f.o.b)

Balance on Services

Services: credit

ofWhichTransportation

Travel

Services: debit

ofWhichTransportation

Travel

Insurance & Pension Services

Balance on Primary Income

Primary income: credit

Primary income: debit

Balance on Secondary Income

Secondary income, n.i.e.: credit

Secondary income: debit

B. CapitalAccount, n.i.e.Capital account, n.i.e.: credit

C. FinancialAccount, n.i.e.Direct investment: assets

Direct investment: liabilities, n.i.e.

Portfolio investment: assets

Equity and investment fund shares

Debt securities

Portfolio investment: liabilities, n.i.e.

Equity and investment fund shares

Debt securities

Financial derivatives: net

Financial derivatives: assets

Financial derivatives: liabilities

Other investment: assets

Other debt instruments

Central bank

Deposit-taking corporations, except the central bank

Other sectors

Non-financial corporations, households, and NPISHs

Other investment: liabilities, n.i.e.

Other debt instruments

Deposit-taking corporations, except the central bank

General government

Other sectors

Non-financial corporations, households, and NPISHs

D. Net ErrorsandOmissionsE. Overall BalanceF. ReservesandRelated Items

Reserve assets

Credit and loans from the IMF

Exceptional financing

2016-684.4

238.4

6,534.8

4,399.1

112.9

1,770.2

191.2

6,296.4

-487.5

885.2

38.3

682.6

1,372.8

750.0

247.4

111.4

-647.1

77.0

724.1

211.9

246.4

34.5

55.055.0

-347.8176.7

662.9

-27.0

-27.0

0.0

389.7

3.0

386.7

-15.3

-8.8

6.5

1,294.3

1,294.3

-284.9

235.8

1,343.4

1,343.4

723.9

723.9

171.5

161.1

391.2

391.2

24.7256.8-256.8-325.6

-68.8

0.0

Table2.4:Balanceof Payments, [US$'million], 2016-20182017r-435.0

960.2

8,215.5

6,118.6

124.8

1,752.8

156.1

7,255.4

-609.3

864.9

48.8

652.6

1,474.3

841.3

223.3

121.5

-1,144.7

73.1

1,217.9

358.8

448.5

89.7

58.458.4

-364.2-72.0

1,107.5

43.9

0.0

43.9

278.6

-2.5

281.2

-68.2

79.1

147.3

1,763.7

1,763.7

-235.0

150.0

1,848.7

1,848.7

645.3

645.3

-3.7

745.7

-96.7

-96.7

30.7-18.318.3-55.3

-73.6

0.0

2018* *-341.4

513.9

9,029.4

6,658.4

116.7

2,036.1

148.0

8,515.5

-724.3

953.3

53.8

742.2

1,677.5

957.4

279.3

117.4

-407.0

28.4

435.4

275.9

373.96

98.0

66.1866.2

99.945.3

408.4

5.4

0.0

5.4

-232.7

-5.4

-227.4

-32.0

-1.5

30.5

1,591.4

1,591.4

-56.5

236.3

1,411.6

1,411.6

1,334.5

1,334.5

105.9

1,526.2

-297.5

-297.5

-12.6387.8-387.8-449.2

-61.4

0.0

The growth in export earnings was driven by higher copper and Non-Traditional Export (NTE)earnings (Chart 2.19). Copperexport earnings roseby8.8%toUS$6,658.4million, due toan increasein both export volumes and realised prices. Copper export volumes grew by 2.6% to 1,050,336.0mtfrom 1,023,859.1 mt in 2017 and the average realized price for copper, at US $6,339.3 per mt, was6.1%higher thanUS$5,976.1permt in2017.

Cobalt earnings, at US $116.7million in 2018were, however, lower than US $124.8million recordedin 2017 on account of a reduction in export volumes to 1,663.3 mt from 2,676.4 mt. Nevertheless,average realised prices increased to US $70,162.2 per mt from US $46,616.3 per mt, therebymoderating the fall in cobalt export earnings. Gold earnings fell by 5.2% to US $148.0 million, onaccount of a reduction in export volumesdespite the average realizedprices increasingby3.5%toUS$1,173.9permt.

Non-traditional export earnings, at US $2,036.1million in 2018,were16.2%higher thanUS$1,752.8million recorded in 2017. The rise in NTEs was mainly on account of an increase in earnings fromselected products such as sulphuric acid, cane sugar, industrial boilers and equipment, cement andlime, andburley tobacco(Table2.5). 15

Chibu luma M ines - Processing

CHART 2.19ExportEarnings(US $ million),2016 - 2018


-

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

Copper NTEs Cobalt Gold

US$Million

2016 2017 2018

Capital andFinancialAccounts

Thecapital account surplus increased toUS$66.2million fromUS$58.4million in2017due tohigherproject in�lows. The �inancial account, however, registered a de�icit of US $99.9 million against asurplus of US $364.2 million in 2017. The unfavourable Performance in the �inancial account wasmainly explained by a marked reduction in direct investment in�lows and net portfolio investmentout�lows. The current and �inancial account de�icits were mainly �inanced by a drawdown of grossinternational reserves.

GrossInternationalReserves

At end-December 2018, gross international reserves (GIR) declined to US$1.6 billion, representing1.8months of import cover, fromUS $2.1 billion in 2017 (Chart 2.20). The reduction in reserveswaslargely attributed to higher external debt service payments. However, the decline in reserves wasmoderated by net foreign exchange purchases by the Bank of Zambia from the market and mineralroyalty receiptsamounting toUS$346.0millionandUS$134.9million, respectively.

Commodity/ ProductGemstones

Sulphuric Acid

Industrial Boilers and Equipment

Cane Sugar

Gasoil/PetroleumOils

Cement & Lime

Electricity

Raw hides, Skins & Leather

Sulphur

BurleyTobacco

Copper Wire

Scrap of precious metals

Maize &Maize Seed

Electrical Cables

Cotton Lint

Soap

Fresh Fruits &Vegetables

ManganeseOres/Concentrates

Wheat &Meslin

Fresh Flowers

201621.8

42.2

117.2

119.7

9.4

70.9

18.7

11.4

2.7

89.3

68.8

0.2

189.6

15.8

57.2

44.8

14.3

8.0

6.3

10.2

*Table2.5:MajorNon-Traditional Exports(c.i.f ) (US$million), 2016-2018

Source: Bank of Zambia(*) c.i.f = cost, insurance and freight

20176.6

72.6

79.9

137.0

7.9

74.5

69.4

9.1

0.0

88.5

85.3

0.4

97.7

20.0

38.4

45.9

14.7

31.3

0.4

10.9

201810.7

171.3

126.6

124.8

9.6

113.6

83.1

5.4

0.1

104.6

78.9

1.5

44.4

21.2

49.2

53.1

13.0

27.0

0.0

10.1

%Change62.8

135.8

58.4

-8.9

20.6

52.6

19.7

-40.5

3,182.0

18.3

-7.5

284.3

-54.5

5.8

28.2

15.6

-11.2

-13.7

-97.6

-7.1

CHART 2.20GrossInternationalReserves,2015 -2018


0

1

2

3

4

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Monthsofimportcover

US'million

Gross International Reserves(LHS) US $millions Months of import cover forGIR (RHS)16

Directionof International Trade

Major ExportMarketsbyRegion

TheNon-EuropeanUnionOrganisation for Economic Cooperation andDevelopment (Non-EUOECD)region continued to be the largest export market for Zambia, accounting for 42.5% of total exports(Chart 2.21). The major export destination in the region was Switzerland14, with copper being themajorexportproduct.

Asia ranked second, accounting for 28.7%of total exports,with China being themajor exportmarket,particularly for copper. This was followed by dual members of the Southern African DevelopmentCommunity (SADC) and Common Market for Eastern and Southern Africa (COMESA), representing12.0% of total exports. The Democratic Republic of Congo was the major market, with inorganicchemicals, sulphur, and sugar being the major export products. SADC exclusively was fourth, andaccounted for 6.6% of total exports, with South Africa being the major export destination in theregion.Majorexportproducts to this region includedcopperwireandelectric cables.

Major Sourcesof ImportsbyRegion

Themajor source of Zambia's imports continued to be SADC exclusively, accounting for 33.4% of thecountry's total imports (Chart 2.22). Imports from the regionmainly comprisedmotor vehicles, ironand steel, and industrial boilers and equipment mainly from South Africa. Asia was second,accounting for 33.0% of Zambia's imports. Major imports from this region included motor vehicles,iron and steel, electrical machinery and equipment, and industrial boilers and equipment andpharmaceuticalproducts.

The SADCandCOMESAdual membersranked third, collectively accounting for 17.9%of Zambia's totalimports. Imports fromthisregioncomprisedmainlycopperoresandconcentrates fromtheDRC.

CHART 2.21Direction ofExports byRegion(US$ millions),2016-2018


-

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

OECD NON-EU EU ASIA SADC &COMESA (DualMembers)

SADC(Exclusively)

COMESA(Exclusively)

OTHER

2016 2017 2018

CHART 2.22Direction ofImports byRegion(US$ millions),2016-2018


-

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

SADC(Exclusively)

ASIA COMESA &SADC (DualMembership)

EU OECD NON-EU

COMESA(Exclusively)

2016 2017 2018

OTHER

1714Large metal traders based in Switzerland purchase copper and cobalt from Zambia destined for other export markets, mainly China.

2.4 EXTERNALDEBT

GovernmentDebtStock

Preliminary data indicate that the external debt stock of Government increased by 12.7% to US$10,047.8million in 2018 (Table 2.6). The rise in debtwas on account of newdisbursements,mainlyfrom commercial and export creditors. Public external debt as a ratio of GDPwas recorded at 40.0%compared to34.7% in2017.Of the totalGovernmentexternaldebt stock in2018, 78.1%wasowed tocommercial, export and supplier creditors; 18.6% to multilateral creditors; and 3.3% to bilateralcreditors (Table2.6).

GovernmentExternalDebtService

Government external debt service increased by 47.5% to US $983.2 million in 2018 from US $666.7million in 2017. Debt service constituted principal maturities during the year amounting to US$413.5millionand interestandother chargesequivalent toUS$569.7million (Table2.7).

PrivateandParastatalNon-GuaranteedExternalDebt Stock

The total external debt owed by the private sector and the non-guaranteed parastatal sectorincreasedwith preliminary data showing a 10.7%rise toUS $9,144.6million at end-December 2018(Table2.8).The increasewasmainlyattributedtonewdisbursements,mostly tominingcompanies.

CreditorBilateralParis Club

Non Paris Club

MultilateralIMF

World BankGroup

African Development BankGroup

Others

Suppliers/ Export/BanksTotalGovt. Debt

US$'million459.3219.9

239.3

1,464.60182.09

695.7

376.5

210.3

4,927.16,685.9

Table2.6:Government External Debt StockbyCreditor, 2016 –2018

Source: BoZ/Ministry of Finance* Preliminary

%share6.73.2

3.5

21.42.7

10.2

5.5

3.1

71.9100

US$'million373.80127.60

246.21

1,740.13125.3

892.4

433.2

289.2

6,801.618,915.54

%share4.191.43

2.76

19.521.41

10.01

4.86

3.24

76.29100

US$'million332.63101.28

231.35

1,870.9662.32

1,011.69

498.97

-

7,844.1710,047.8

%share3.31.0

2.3

18.60.6

10.1

5.0

-

78.1100

2016 2017 2018*

CreditorBilateralParis Club

Others

MultilateralWorld BankGroup

IMF

ECU/EIB

Others

Suppliers/Bank(commercial)/ExportTotal

201639.71.0

38.7

102.9

7.669.1

0.4

25.8

442.4585.0

Table2.7:Zambia'sOfficial External Debt ServicebyCreditor 2016 –2018(US$'million),

Source: BoZ/Ministry of Finance* Preliminary

201765.16.5

58.6

100.1

14.069.2

1.5

15.4

501.5666.7

201860.46.5

58.6

108.2

17.469.2

1.9

19.7

814.6983.2

18

2.5 FISCALSECTORDEVELOPMENTS

Preliminary data indicate that the �iscal de�icit for 2018, at 7.6% of GDP or K21.1 billion (on a cashbasis), was above the target of 6.1%. This largely re�lected higher spending on capital projects andinterestpayments. Excludinggrants, the �iscalde�icitwas recordedat7.9%ofGDP(Chart2.23).

RevenueandGrants

Total revenueandgrants in2018, atK53.4billion (18.6%ofGDP),were3.7%higher than the targetofK51.5 billion. This outturn was largely attributed to higher collections on some revenue categoriesand non-tax revenue (Table 2.9). Domestic revenue accounted for 98.8% of the total revenue whilegrantsaccounted foronly1.2%.

TaxRevenue

Total tax revenues, atK44.2billion (16.0%ofGDP)were8.2%above the targetofK40.9billion (14.8%of GDP). This outturnwasmainly due to improved compliance on VAT, and higher than programmedcollectionsonPayAsYouEarn(PAYE)and fuel levy.

Non-TaxRevenue

Non-tax revenue, at K8.6 billion, was 4.3% above the target of K8.2 billion largely due to higher thanprogrammed collections from road tolls on account of the increased number of tolling gates. Inaddition, higher thanprogrammedmineral royalty supportedby relatively higher commodity priceson the internationalmarket, contributedto therise innon-taxrevenue.

CreditorPrivateMultilateral

Financial Institutions

Parent and Related Company

Other

ParastatalTotal Private andNon-GuaranteedParastatal Debt

US$'million8,548.0

0.0

1,297.8

6,871.4

378.8

660.8

9,208.8

Table2.8: Private andNon-GuaranteedParastatal External Debt Stock, 2016 - 2018

Source: Bank of Zambia* Preliminary data as at end-September 2018

%Share92.8

0.0

15.2

80.4

4.4

7.2

100.0

US$'million7,619.0

0.0

1,077.4

6,106.8

434.8

642.1

8,261.1

%Share92.2

0.0

14.1

80.2

5.7

7.8

100.0

US$'million8,525.0

0.0

762.3

6,901.5

861.2

619.6

9,144.6

%Share93.2

0.0

8.9

81.0

10.1

6.8

100.0

2016 2017 2018

19

CHART 2.23GovernmentBudget De�icit(% of GDP),2013 – 2018


7.5

4.1

9.4

5.8

5.8

7.6

9.2

4.3

9.6

6.1

6.0

7.9

0

2

4

6

8

10

12

2013 2014 2015 2016 2017 2018

PercentofGDP

Overal Balance (cash Basis) Overal Balance ExcludingGrants (cash Basis)

Grants

Total foreign grants, at K635.4 million were 73.9% lower than the target of K2,438.3 million due toslowin�lows fromcooperatingpartners.

Total Expenditure

Total expenditure including amortisation stood at K79.2 billion (26.6% of GDP), in 2018 against atarget of K71.6 billion. This was largely on account of higher than programmed expenditures oncapital projects. Excluding amortisation, total expenditure, at K73.7 billion, was above theprogrammed levelofK68.4billion (Chart2.24).

RevenueandGrantsDomesticRevenueTaxRevenueIncomeTaxOfWhichPayAsYouEarnTaxCompanyTaxOther IncomeTax

ValueAddedTax(VAT)DomesticVATImport VAT

InsurancePremiumLevyCustomsandExciseDutiesOfWhichCustomsDutiesExciseTaxes

Export DutiesNon-taxRevenueOfWhichFeesandChargesDividendsand InterestMineral Royalty

GrantsProgrammeProjects

K'bn39.438.928.014.98.2

4.0

2.7

8.00.1

7.9

0.15.11.9

3.1

0.010.92.3

4.1

3.1

0.50

0.5

Table 2.9:CentralGovernment RevenueandGrants, 2016 –2018

Source: Ministry of Finance

%ofGDP18.518.213.27.03.8

1.9

1.3

3.70

3.7

02.40.9

1.5

05.11.1

1.9

1.4

0.20

0.2

K'bn43.042.636.516.48.7

4.5

3.3

13.95.6

8.3

0.16.12.9

3.2

0.06.13.4

1.8

2.4

0.50

0.5

%ofGDP17.617.414.96.73.5

1.8

1.3

5.72.3

3.4

02.51.2

1.3

02.51.4

0.7

1.0

0.20

0.2

K'bn51.549.140.920.310.2

6.1

4.1

12.44.1

8.3

0.18.03.3

4.7

0.18.24.2

0.1

3.5

2.40

2.4

%ofGDP18.617.714.87.33.7

2.2

1.5

4.51.5

3.0

02.91.2

1.7

03

1.5

0

1.4

0.90

0.9

2016 2017

K'bn53.452.844.220.210.4

6.0

3.8

17.46.5

10.9

0.16.63.1

3.4

08.63.9

0.1

3.9

0.60

0.6

%ofGDP19.319.1167.33.8

2.2

1.4

6.32.3

3.9

02.41.1

1.2

03.11.4

0

1.4

0.20

0.2

2018Target Prel (Releases)

CHART 2.24

Percent of GDP)

TotalExpenditure(2014 - 2018

Source:Ministry of Finance

22.6

18.5

4.1

28.1

20.7

7.2

27.3

20.3

3.9

24.3

19.1

28.6

18.1

0

5

10

15

20

25

30

35

Total Expenditure Current Expenditure Assets

PercentofGDP

2014 2015 2016 2017 2018

3.5

8.4

20

Current Expenditure

In 2018, total current expenditure, at K50.1 billion, was 4.5%below the target of K52.4 billion due toconstrained �inancing (Table 2.10). The major categories of expenditure that were lower thanprogrammed includeduseofgoodsandservices,personal emolumentsandsocial bene�its.

Assets

Total expenditureonassets in2018, atK23.1billion,was57.8%above the targetofK14.7billion. Theelevated expenditure on assets was attributed to higher than programmed disbursements on roadsand foreign �inancedcapitalprojects.

Deficit Financing

Total net budget �inancing of K21.1 billion in 2018was 24.7%above the target of K16.9 billion (Table2.11).Thede�icitwasmainly �inanced throughexternalborrowing.

Total Expenditure (excl. amortisation)Current Expenditure

Wages and Salaries

Use of Goods and Services

Interest on Public Debt

Domestic Debt

Foreign Debt

Grants &Other Payments

Social Benefits

Other Expenses

Liabilities

Assets

Non-Financial Assets

Financial Assets

K'bn58.543.4

18.8

4.8

7.4

4.0

3.4

10.9

0.5

0.9

0.1

8.4

8.1

0.2

Table2.10:CentralGovernment Expenditures, 2016 –2018

Source: Ministry of Finance

%ofGDP27.420.3

8.8

2.2

3.5

1.9

1.6

5.1

0.2

0.4

0.1

3.9

3.8

0.1

K'bn59.547.0

20.0

4.8

9.8

5.0

4.8

9.2

1.9

1.1

2.0

8.6

8.3

0.3

%ofGDP24.319.2

8.2

2.0

4.0

2.1

2.0

3.7

0.8

0.4

0.8

3.5

3.4

0.1

K'bn68.452.4

23.1

7.4

10.9

6.8

4.2

8.0

1.8

1.2

1.3

14.7

14.2

0.4

%ofGDP24.718.9

8.3

2.7

3.9

2.4

1.5

2.9

0.6

0.4

0.5

5.3

5.1

0.2

2016 2017

K'bn73.750.1

21.9

5.7

13.6

7.4

6.2

7.4

1.0

0.6

0.4

23.1

23.1

0.0

%ofGDP26.618.1

7.9

2.1

4.9

2.7

2.2

2.7

0.3

0.2

0.2

8.4

8.3

0.0

2018Target Prel (Releases)

21

Dual carriage way -Great North Road

2.6 REALSECTORDEVELOPMENTS

NationalOutput

Preliminarynational accountsdata shows that theeconomygrewby3.7%in2018compared to3.5%in 2017 (Table 2.12), driven by a strong rebound in information and communications activities,which contributed 1.1 percentage points to overall annual economic growth. The wholesale andretail trade,miningandmanufacturingsectorsalsocontributedsigni�icantly togrowth in2018.

Agriculture,ForestryandFisheries

Theagriculture, forestryand �ishing sector recordeda13.8%decline inoutput in2018,mainlydue toinadequate rainfall and challenges in the distribution of inputs in the agriculture sub-sector.Agriculture production formostmajor crops declined during the 2017/2018 farming season due toprolonged dry weather conditions across the southern half of the country. In particular, maizeproduction suffered from additional challenges linked to sporadic outbreak of the fall army wormsand the bottlenecks in the rollout of the e-voucher system under the farmer input support

Total FinancingDomesticBridge loan

Com. Banks

Carry-over funds

Amortisation

ExternalProgramme Loans

Project Loans

Amortisation

K'bn12.56.65.8

0.4

0.0

-4.7

4.20.0

4.8

-2.0

Table2.11:Budget Deficit Financing, 2016 –2018

Source: Ministry of FinanceDash (-) means not available

%ofGDP5.93.12.7

0.2

0.0

-2.2

2.00.0

2.2

-0.9

K'bn15.011.90.0

0.2

0.0

-0.5

3.11.3

3.6

-1.8

%ofGDP6.14.90.0

0.1

0.0

-0.2

1.30.5

1.5

-0.7

K'bn16.910.90.0

0.0

0.0

0.2

6.01.4

7.6

-3.0

%ofGDP6.14.00.0

0.0

0.0

-0.1

2.20.5

2.7

-1.1

2016 2017

K'bn21.17.10.0

0.0

0.0

2.1

14.00.0

17.4

-3.4

%ofGDP7.62.60.0

0.0

0.0

-0.8

5.10.0

6.3

-1.2

2018Proj. Preliminary

Kindof EconomicActivityAgriculture, Forestry and Fishing

Mining andQuarrying

Manufacturing

Electricity, Gas, steam and air

Water supply, sewerage, waste management

Construction

Wholesale and Retail Trade

Transportation and Storage

Accommodation and food services

Information and communications

Financial Institutions & Insurance

Real Estate & Business Services

Public admin. and defence; social security

Education

Human health and social work activities

Arts, entertainment and recreation

Other service activities

Growth inRealGDP(%)

20163.7

7.3

1.9

-13.6

-4.1

10.2

-0.1

1.2

-2.2

17.4

-2.4

3.2

9.7

4.7

1.6

0.5

3.2

3.8

Table2.12: RealGDPGrowth (%), 2016 –2018

Source:Central Statistical Office/ Ministry of Finance*Preliminary estimates

20179.8

3.0

4.4

23.6

-3.1

6.4

0.7

7.8

6.1

-13.2

-5.8

2.9

2.8

6.7

17.4

-4.0

2.8

3.5

2018*-13.8

5.9

5.3

12.0

4.3

5.0

3.5

4.5

1.8

27.8

3.9

2.5

-0.6

3.6

16.0

12.2

2.5

3.7

22

programme (FISP). Consequently, maize output dropped by 33.6% to 2.4 million mt, the lowestexpectedyield since the2014/15cropseason(Table2.13).

MiningandQuarrying

The mining and quarrying sector registered positive growth in 2018, growing at 5.9% compared to3.0% in 2017 (Table 2.12). This was driven by an increase in copper production by 6.8% to 851,087mt in 2018 from 797,266mt in 2017. Stable electricity supply, favourable international prices and aramp-up in production by some mines supported the increase in copper production. However, coalproductiondeclinedby27.9%to60,000mt.

Manufacturing

Economic activity in themanufacturing sector increased in 2018, growing at 5.3%compared to4.4%in 2017 (Table 2.12). Stable power supply, coupled with stable consumer demand, helped to boostgrowth in thesector.

CropMaize

Wheat

Seed cotton

Sorghum

Rice

Millet

Groundnuts

Soya beans

Mixed Beans

Sweet Potatoes

VirginiaTobacco (kg)

BurleyTobacco (kg)

2016/173,606,549

193,713

89,293

17,337

38,423

32,566

168,699

351,416

45,938

206,676

12,079

8,416

Table2.13:ComparativeNationalCropProductionEstimates(metrictonnes) 2015–2018

Source: Ministry ofAgriculture and Livestock/ Central Statistical Office

2017/182,394,907

114,463

88,219

13,130

43,063

32,278

181,772

302,720

52,351

183,280

13,382

11,512

Growth (Percent)-33.6

-40.91

-1.2

-24.3

12.1

0.9

7.8

13.9

14.0

-11.3

10.8

36.8

2015/162,873,052

156,555

111,902

14,107

26,675

29,973

131,562

267,490

45,351

231,882

12,540

6,476

23

2018AgricExpo

AccommodationandFoodServices

Mobile Subscription

Fixed Internet Subscription

Mobile Internet Usage

DomesticOutgoingTraffic (Minutes)

Domestic IncomingTraffic (Minutes)

International IncomingTraffic (Minutes)

InternationalOutgoingTraffic (Minutes)

SMS/MMSTraffic

201713,438,539

32,842

7,723,855

9,967,432,124

1,614,112,062

61,088,178

43,146,291

7,228,443,842

Table2.15Usageof selected Informationandcommunicationservices

Source: ZICTA

201815,470,270

44,711

9,825,716

13,975,890,482

2,031,404,096

37,414,374

39,891,483

10,060,039,566

Percent change15.1%

36.1%

27.2%

40.2%

25.9%

-38.8%

-7.5%

39.2%

201612,017,034

35,919

5,156,365

1,500,328,930

1,089,330,526

72,816,296

86,757,866

7,070,191,769

24

National ParkKafue

Lower Zambezi

Mosi-o-Tunya

South Luangwa

Lusaka National Park

Total

20179,733

9,368

21,945

38,331

14,850

94,227

Table 2.14:Tourist Arrivalsat MajorNational Parks, 2016-2018

Source: ZambiaWildlife Authority

201813,721

11,161

20,378

43,469

11,769

100,498

Percent Change41.0%

19.1%

-7.1%

13.4%

-20.7%

6.7%

201611,347

12,143

20,303

46,510

17,161

107,464

25

NewKennethKaunda InternationalAirport under construction

Financial SystemRegulation and Supervision

3.0

27

3.0 FINANCIALSYSTEM REGULATION& SUPERVISION3.1 BANKINGSECTOR

Structureof theBankingSector

The number of licensed commercial banks operating as at end-December 2018 increased to 18 from17 as at end-December 2017. Of these, eightwere subsidiaries of foreign banks15, sevenwere locallyownedprivatebanks16 andthreewerepartiallyownedbyGovernment.

PerformanceandConditionof theBankingSector

The overall �inancial performance and condition of the banking sector at end-December 2018 wasrated satisfactory. This ratingwasonaccount of satisfactory capital adequacy, earningsperformanceand liquidityposition.Thesector'sassetqualitywas, however, adversely rateddue to thehigh levelofnon-performing loans (NPLs), as re�lected in the ratio of NPLs to gross loans and advances, whichpersistedabove the10.0%prudential threshold (Table3.1).

Despite the overall performance and condition of the sector being satisfactory, the performance ofsome banks remained a source of concern owing to their high NPLswhich adversely impacted theirearnings performance (Tables 3.2 and 3.3). The Bank of Zambia (BoZ) continued to monitor thesebankscloselyandrecommendedcorrectivemeasures toprevent furtherdeterioration.

Primary capital adequacy ratio

Total regulatory capital adequacy ratio

Net non-performing loans to regulatory capital

Gross non-performing loans to total loans

Net non-performing loans to total loans

Net non-performing loans to net loans

Provisions to non-performing loans

Earning assets to total assets

Net operating income to total assets

Non-interest expense to total assets

Provision for loan losses to total assets

Net interest income to total assets

Return on assets

Return on equity

Efficiency ratio

Liquid assets to total assets

Liquid assets to deposits and short-term liabilities

201623.4

26.2

7.6

9.7

2.8

3.0

69.6

69.2

10.8

7.7

0.7

6.1

2.5

12.3

81.5

39.1

49.0

Table3.1: Financial Performance Indicators(Percent), 2016 - 2018


201724.5

26.5

10.8

12.0

4.0

4.4

66.5

79.5

11.0

7.3

0.8

6.4

3.1

15.4

65.1

45.9

56.5

201820.1

22.1

4.3

11.0

1.5

1.6

83.8

86.4

12.6

8.5

1.0

7.7

2.8

15.4

73.7

45.9

57.0

PerformanceRatingSatisfactory

Fair

Marginal

Unsatisfactory

Total

201610

6

1

1

18

Table3.2:CompositeRatingsof BankingSectorFinancial PerformanceandCondition, 2016 - 2018


20179

3

3

2

17

201810

3

3

1

1717

201686.1

11.6

0.3

2.0

100.0

201782.3

3.9

8.8

5.0

100.0

201882.2%

6.8%

9.8%

1.2%

100.0

201688.4

8.6

1.0

2.0

100.0

201783.7

3.6

7.8

4.9

100.0

201884.5%

5.7%

8.5%

1.3%

100.0

Numberof Banks Percent ofTotalAssets Percent ofTotal Deposits

15Theseare locally incorporatedsubsidiariesof foreignbanks.16Banks incorporated locally which are neither subsidiaries of foreign banks nor partly owned by Government. A locally owned bank is a bankwhere at least 51% of its equity is owned by Zambian Citizens and/or entities incorporated in Zambia that have at least 51% equity owned byZambiancitizens.

17Total number of banks is 18. However analysis excludes Zambia Industrial Commercial Bank (ZICB) which only commenced submission ofreturns in January2019.

28

BALANCESHEET

AssetStructure

The asset structure of the banking sector remained largely unchanged as net loans and advancescontinued to account for the largest component of total assets at 32.0%, followed by investments inGovernment securities and balances with �inancial institutions abroad at 24.9% and 23.8%,respectively (Table3.4a)

The total assets of the banking sector grew by 14.5% to K82, 098.8 million at end-December 2018fromK71, 710.4million at end-December 2017 (Chart 3.1). The growthwasmainly in balances with�inancial institutions abroad, and net loans and advances, which went up by 39.8% and 17.5%,respectively.Thegrowth innet loansandadvanceswaspartlyattributedto theavailabilityof loanablefunds following the BoZ's monetary policy decision to lower the statutory reserve ratio to 5% from8%inFebruary2018.

LiabilitiesStructure

Deposits continued to account for the largest proportion of the liabilities of the banking sector at74.6% (Table 3.4b). Total deposits comprised of core deposits (demand and savings) whichaccounted for 71.7% of total deposits, while the remaining 28.3% were non-core deposits (timedeposits).

PerformanceRatingSatisfactory

Fair

Marginal

Unsatisfactory

Total

201611

3

1

3

18

Table3.3:Component Ratingsof theBankingSector Financial PerformanceandCondition, 2016 - 2018


201713

0

0

4

17

201810

1

0

4

17

20168

4

5

1

18

20178

5

2

2

17

20189

4

3

1

17

20167

6

3

2

18

20177

4

2

4

17

201810

3

0

3

17

CapitalAdequacy Asset Quality Earnings201614

2

1

1

18

20179

6

1

1

17

201811

5

0

1

17

Liquidity

Net Loans and advances

Balances with Foreign Financial Institutions

Balances with Bank of Zambia

Investments inGovernment Securities

Other

Total

201633.6

19.2

18.1

15.5

13.6

100.0

Table 3.4a:Asset Structure (Percent), 2016 - 2018


201731.1

19.5

9.0

26.7

13.6

100.0

201832.0

23.8

6.2

24.9

13.1

100

Deposits

Other Liabilities

Balances Due to Financial InstitutionsAbroad

Other Borrowed Funds

Balances Due to Financial Institutions in Zambia

Others

Total

201683.2

6.8

5.9

2.9

1.1

0.2

100.0

Table3.4b: LiabilityStructure (Percent), 2016 - 2018


201785.8

5.8

4.1

2.4

1.2

0.5

100.0

201874.6

5.4

5.8

2.0

0.6

11.6

100.0

29

PERFORMANCEINDICATORS

CapitalAdequacy

The regulatory capital of the banking sector was rated satisfactory. The sector's primary and totalregulatory capital increased by 9.6% and 11.6% to K9, 160.8 million and K10, 079.7 million at end-December 2018, respectively. This outturn was largely attributed to fresh capital injections in somebanks.

Risk weighted assets (RWA) grew proportionally higher than the growth in capital, resulting in theprimary and total regulatory capital adequacy ratios declining to 20.1% and 22.1% from 24.5% and26.5% at end-December 2017, respectively. The capital adequacy ratios, however, remained wellabove theminimumregulatoryrequirementsof5.0%and10.0%, respectively (Chart3.2).

The ratio of net NPLs to regulatory capital declined to 4.3% from 10.8% at end-December 2017,implying that the amount of capital at risk fromNPLs had decreased due to increased provisions forpotential loan losses.

AssetQuality

The banking sector's asset quality was rated fair18 on account of high NPLs. The NPL ratio, however,declined to 11.0% from 12.0% at end-December 2017, on account of gross loans and advancesincreasing by a highermargin relative to the rise inNPLs. GrossNPLs increased by9.2% toK3, 174.8million, while gross loans and advances increased by 19.5% to K28, 990.2 million (Table 3.5).AlthoughtheNPLratiodeclined in2018, it remainedabove theprudential thresholdof10.0%.

CHART 3.1:Total Assetsand DepositLiabilities,(K' billion)2014 – 2018


-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0


K'billion

Total assets Total Deposit liabilities

CHART 3.2:RegulatoryCapital, RWAand CapitalAdequacyRatios,2014 – 2018


0

5

10

15

20

25

30

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00


K'billion

Percent

Total RegulatoryCapital (LHS) RiskWeightedAssets (LHS) CaptialAdequacy Ratio (RHS)

18Fair rating means asset quality or credit administration practices are less than satisfactory.

30

On a sectoral basis, the agriculture, forestry, �ishing and hunting sector accounted for the largestproportionof grossNPLsat32.4%(Table3.6).With regard to intra-sector19 NPLs the restaurants andhotels, and construction sectors continued tobe theworst performing as evidencedby thehigh intra-sectorNPLratioof79.4%and37.9%, respectively (Table3.7).

Risk-AbsorbingCapacity

The banking sector's coverage ratio20 rose to 86.4% from 66.5% at end-December 2017, due to a41.8% increase in allowances for loan losses (ALLs) toK2,742.3million. The increase in the coverageratio implied that thesector's capacity toabsorbpotential loan losseshad increased(Chart3.3).

Gross loans (K' billion)

NPLs (K 'billion)

Substandard (K' billion)

Doubtful (K' billion)

Loss (K' billion)

NPL ratio (Percent)

Substandard

Doubtful

Loss

201623.3

2.3

0.2

0.2

1.8

9.7

1.0

0.9

7.8

Table 3.5:GrossLoansandNon-PerformingLoans, 2016 - 2018


201724.3

2.9

0.2

0.3

2.4

12.0

0.9

1.1

10.0

201829.0

3.2

0.3

0.2

2.6

11.0

1.0

0.7

9.0

SectorAgriculture, forestry, fishing and hunting

Mining and quarrying

Manufacturing

Electricity, gas, water and energy

Construction

Wholesale and retail trade

Restaurants and hotels

Transport, storage and communication

Financial services

Personal loans

Other sectors

Total

201626.7

1.9

6.6

0.5

7.1

11.7

10.6

5.4

2.9

12.3

14.4

100.0

Table3.6:Sectoral Distributionof NPLs(Percent), 2016 –2018


201732.7

3.0

5.1

0.6

9.3

11.8

9.0

5.1

1.6

9.4

12.3

100.0

201832.4

3.0

5.1

0.6

9.4

11.7

8.9

5.1

1.6

10.3

12.1

100.0

SectorAgriculture, forestry, fishing and hunting

Mining and quarrying

Manufacturing

Electricity, gas, water and energy

Construction

Wholesale and retail trade

Restaurants and hotels

Transport, storage and communication

Financial services

Personal loans

201615.2

2.9

5.0

2.3

17.7

11.1

74.1

11.4

15.5

4.4

Table3.7: Intra-SectorNPLRatios(Percent), 2016 –2018


201726.7

5.7

10.3

3.5

29.9

15.7

86.3

13.9

18.6

17.7

201828.3

4.8

20.2

2.3

37.9

15.0

79.4

13.1

16.2

11.2

19Intra-sector NPLs refer to the loans within the sector that are not performing.20NPL Coverage ratio is the proportion of the gross NPLs covered by the provisions for loan losses (PLL) [i.e., PLL/NPLs].

EarningsPerformanceandProfitability

The banking sector's earnings performance was satisfactory. The sector's pro�it before tax (PBT)increased by 8.0% to K2, 228.3 million. The increase in pro�it was mainly on account of higher netinterest income driven by earnings from Government securities and balances with �inancialinstitutions abroad. This was despite loan loss provisions increasing by 28.9% to K719.6 millionfollowing the implementationof the InternationalFinancialReportingStandard,9 (IFRS921 .

The banking sector's return on assets and the return on equity ratios decreased to 3.0% and 14.8%,from 3.1% and 15.4% at end-December 2017, respectively. This was on account of proportionatelyhigher increases in the sector's total assets and equity compared to the increase in net pro�it (Table3.8).

Non-interest expenses increased by 16.3% to K6,089.1 million, resulting in the decline in theef�iciencyratio22 deteriorating to73.7%in2018 from65.1%in2017(Chart3.4).

31

CHART 3.3:Non-PerformingLoans,Provisions andNPL CoverageRatio (Percent),2014-2018


60.0

62.0

64.0

66.0

68.0

70.0

72.0

74.0

76.0

78.0

0

0.5

1

1.5

2

2.5

3

3.5


Gross non-performing loans (NPL) (LHS) Allowance for Loan Losses (ALL) (LHS) NPLCoverage Ratio (RHS)

ParticularsInterest Income

Interest Expenses

Net Interest Income

Non-Interest Income

NetOperating Income

Non-Interest Expenses

Pre-ProvisionOperating Profit (PPP)

Loan Loss Provisions

Profit BeforeTaxation

Taxation

Net Profit

20166.6

2.6

3.9

3.0

7.0

5.0

2.0

0.4

1.6

0.6

1.0

Table3.8:Summarised IncomeStatement (K’billion), 2016 - 2018


20177.2

2.6

4.6

3.2

7.9

5.2

2.6

0.6

2.1

0.7

1.3

20187.5

2.0

5.5

3.6

9.0

6.1

2.9

0.7

2.2

0.9

1.4

21Implementationof IFRS9changed themodel forcomputing loan lossprovisions from incurred loss toexpected loss.22This is a ratio of non-interest expenses to net operating income. An increase in the ratio means that a bank is losing a larger proportion of itsincometooverheadcosts.

Percent

Percent

32

In 2018, the principal sources of income for the banking sector continued to be interest income fromloans and advances accounting for 35.5% of total income, and interest income from securitiesaccounting for27.8%(Chart3.5).

LiquidityandFundsManagement

The sector's liquidity positionwas satisfactory23. The ratio of liquid assets to total deposits and shortterm liabilities (liquidity ratio) remainedbroadlyunchangedat 57.0%,while the ratio of liquid assetsto totalassets rose to47.0%from45.9%(Chart3.6).

CHART 3.4:Net OperatingIncome,Non-InterestExpenses andEf�iciency Ratio,2014 – 2018


0

10

20

30

40

50

60

70

80

90

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9


K'billion

NetOperating Income Non-Interest Expenses Efficiency Ratio

CHART 3.5:OperatingIncome(Percent)


0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Interest income from loans and advances

Interest income from securities

Other interest income

Commissions, fees and service charges

Foreign exchange income

Other noninterest income

K'Billion

Dec-18 Dec-17 Dec-16 Dec-15

4.5 5.0

CHART 3.6:Liquid AssetsRatio andLiquidityRatio(Percent),2014 – 2018


-

10.0

20.0

30.0

40.0

50.0

60.0


Percent

Liquid Asset ratio Liquidity ratio

23Satisfactory liquidity means the institution has access to suf�icient liquid assets and sources of funds on acceptable terms to meet presentand anticipated liquidity needs.

Percent

33

Overall, customer deposits continued to constitute the largest source of funding for the sector,accounting for74.6%(Table3.9andChart3.7).

MarketShare

Subsidiaries of foreignbanks continued todominate the banking sector in termsof total assets, loansand deposits, followed by banks partly owned by the Government. With regard to pro�itability, thepattern remained largely the same, with the subsidiaries of foreign banks accounting for the largestproportionof thepro�itbefore tax (Table3.10).

BankBranches

Bank branches continued to be concentrated in Lusaka and the Copperbelt Provinces, whichcollectively accounted for 64.1%, followed by Southern Provincewhich accounted for 12.5%of totalbranches. Luapula Province had the lowest branch coveragewith only 1.9%of total branches (Table3.11). Following themerger of African Banking Corporation (Z) Limited (trading as Atlas Mara) andFinance Bank Zambia Plc, the Bank of Zambia granted approval for African Banking Corporation (Z)Limitedtoclose13branches in locationswherebothbankshadbranches.

Customer deposits

Borrowings

Shareholders' funds

All other liabilities

Total funding

201672.1

9.0

13.0

5.9

100.0

Table3.9: BankingSector FundingSources(Percent), 2016 –2018


201774.9

7.3

12.7

5.1

100

201874.6

8.7

11.3

5.4

100

CHART 3.7:Loans, Deposits,and Loan-to-Deposit Ratio,2014 – 2018


-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0


Percent

K'billion

Loans Deposits Loan-to-deposit ratio

SubsidiariesofforeignbanksBanks with

Government stake

Local private banks

Total

Asset70.8

16.6

12.6

100

Table3.10:Distributionof theAssets, LoansandDepositsbyOwnershipType (Percent), 2016 - 2018


Loans68.1

19.6

12.3

100

Deposits70.4

17.7

11.9

100

PBT97.2

8.9

-6.1

100

Assets73.4

18.1

8.5

100

Loans69.2

20.1

10.7

100

Deposits73.6

18.5

7.9

100

PBT82.3

3.3

14.4

100

Assets73.0

18.2

8.7

100

2016 2017Loans67.9

21.8

10.2

100

Deposits72.2

19.7

8.1

100

PBT68.3

28.1

3.6

100

2018

Kalulushi

NationalSavings

andCreditB

ank

Zanaco

Chirundu

AtlasM

ara

6

25x14

x7

x15

x1

x2x4

4 455 107

x2 x4x4

x6

x3

Maamba

Mfuwe

x4

x3

Sinazeze

x14

2017

ZambiaIndustrialC

ommercialBa

nk

x3

Kalumbila Lu

mwana

34

3.2 NON-BANKFINANCIALINSTITUTIONSSECTOR

Structureof theNBFIsSector

As at end-December 2018, the number of NBFIs was 129, comprising leasing �inance institutions,building societies, micro�inance institutions (consumer and enterprise lending), bureaux de change,a savingsandcreditbank, adevelopmentbankandacredit referencebureau(Table3.12).

PerformanceandConditionof theNBFIsSector

The overall �inancial performance and condition of the NBFIs sector, based on the 10225 rated NBFIs,was fair. Of the rated NBFIs, 32 were satisfactory, 38 were fair, 23 were marginal, while 9 wereunsatisfactory(Table3.13).

Bank

AB Bank Zambia

Access BankZambia

BancABCZambia

Bank of China Zambia

Barclays Bank Zambia

Cavmont Bank

Citibank

Ecobank Zambia

First Alliance Bank

First Capital Bank

First National Bank

Indo Zambia Bank

Investrust Bank

Stanbic Bank Zambia

Standard Chartered Bank

United Bank for Africa

ZICB

ZNCB

Total

20167

6

20

2

56

18

2

10

5

5

24

32

25

28

21

5

0

68

408

Table 3.11:BankBranches, 2016 –2018


20177

7

76

2

45

20

2

7

5

6

4324

31

30

33

23

5

0

68

410

20187

8

63

2

44

19

2

6

6

7

23

30

27

33

17

5

2

71

372

No. of Branches

Typeof Institution

Leasing Finance Institutions

Building Societies

Bureaux deChange

Savings andCredit Institutions

Microfinance Institutions

Development Finance Institutions

Credit Reference Bureaux

Total

20168

4

73

1

34

1

1

122

Table 3.12:Structureof NBFIs, 2016 –2018


20178

3

80

1

34

1

1

128

20188

3

80

1

35

1

1

129

Numberof Institutions

24The number of bank branches was 25 as at end 2017. However, the bank included bank agents to arrive at 43.25The total number of licensedNBFIswas 129. Out of the 129, eleven bureau de change, one leasing company and threeMFIs had not submittedreturns at the time of reporting, while one MFI had its license suspended for a period of six months and another submitted a wrong return.Seven bureaux de change were not operational. The other institution is a credit reference bureau that is not required to submit prudentialreturns.

35

The sector's regulatory capital and sensitivity to market risk were rated satisfactory, while theearnings performance and liquidity management were rated fair. However, asset quality was ratedunsatisfactorydue to thehighnon-performing loans (NPL) ratiowhichat17.6%, remainedabove themaximumprudential limitof10.0%.

PerformanceandConditionof theSub-Sectors

Apart fromthe consumer-lendingMFIs sub-sectorwhoseoverall ratingwas satisfactory, all theothersubsectorshad less thansatisfactoryoverall ratings.

LeasingFinanceInstitutions

Theoverall �inancial condition andperformanceof the leasing and �inancial businesses sub-sector in2018 was rated fair. The sub-sector's regulatory capital, earnings performance and liquiditymanagementweresatisfactory,whileassetqualitywasratedunsatisfactory(Table3.14).

BalanceSheet

Assets

The sub-sector's total assets declined by 4.2% to K488.1 million at end-December 2018, mainlydriven by a decrease of 28.9% and 28.6% in the balances held with domestic institutions and otherassets respectively. The asset structure of the sub-sector as at end-December 2018 is shown in Table3.15.

PerformanceRatingStrong

Satisfactory

Fair

Marginal

Unsatisfactory

Total

20162

6

6

28

2

34

1

23

3

2

106

Table3.13:PerformanceRatingsandFinancialCondition, 2016 –2018


20170

0

5

29

5

30

0

17

3

4

93

20180

0

3

29

6

32

2

21

3

6

102

Numberof InstitutionsLicenceType

Deposit-taking

Non-Deposit-taking

Deposit-taking

Non-Deposit-taking

Deposit-taking

Non-Deposit-taking

Deposit-taking

Non-Deposit-taking

Deposit-taking

Non-Deposit-taking

Percent ofTotalAssetsfor 2018

0.0

0.0

45.0

14.2

8.7

3.4

4.5

16.3

5.9

2.1

100

PerformanceCategory

Strong

Satisfactory

Fair

Marginal

Unsatisfactory

Total

20160

2

0

3

1

6

Table3.14:CompositeRating for theLeasingFinanceSub-Sector, 2016 –2018


20170

1

3

1

1

6

20180

1

2

3

0

6

Numberof LeasingCompanies2016

0

45

0

12

43

100

20170

31

31

21

17

100

20180

16

49

35

0

100

Proportionof IndustryAssets(Percent)

36

Liabilities

Total liabilities dropped by 47.5% to K348.2 million at end-December 2018 largely driven bydecreases in balances due to domestic institutions, foreign institutions and other borrowed fundsfollowing the cancellation of the licence of one of the leasing institutions, which constituted 52.2%oftotal sub-sector liabilities.

CapitalAdequacy

The regulatory capital of the leasing sub-sector was satisfactory as at end-December 2018. The sub-sector's capital adequacy ratio was 45.3%, up from negative 24.4% as at end-December 2017. Theimprovement in the capital adequacy ratio was due to an increase in regulatory capital to K176.5million fromnegative K143.6million at end-December 2017 following the cancellation of the licenceofan insolvent leasing institution(Chart3.8).

AssetQuality

The asset quality of the leasing sub-sector remained unsatisfactory as at end-December 2018.DespiteNPL ratio declining to 23.7%at end-December 2018 from67.2%at end-December 2017, theratio still remainedabove themaximumprudential limit of10.0%.Thedecline in theNPLratiowasasa result of the cancellation of the licence of one of the leasing institutions,which accounted for 68.8%of the sub-sector's NPLs. Consequently, the NPL coverage ratio improved to 126.9% from 91.3% atend-December2017(Chart3.9)

Asset ClassLoans and advances


Balances with Domestic Institutions

Other

Total

201858.4

2.0

7.6

32.0

100.0

Table 3.15:Asset Structure (Percent), 2017- 2018


201751.2

0.0

8.2

40.6

100.0

CHART 3.8:LeasingFinanceRegulatoryCapital(K'millions),2014 – 2018


-250.0

-200.0

-150.0

-100.0

-50.0

0.0

50.0

100.0

150.0

200.0

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Regulatory Capital MinimumCapital

37

EarningsPerformance

The earnings performance of the sub-sector was unsatisfactory in 2018. The sub-sector recorded aloss before tax of K49.9 million compared to a loss before tax of K276.6 million reported in 2017(Chart 3.10). The decrease in the loss was largely due to an increase in interest and non-interestincome.

Liquidity

The liquidity position of the leasing sub-sector was satisfactory. The ratio of liquid assets to totaldeposits and short-term liabilities was 40.3% at end-December 2018, andwas above the prudentialminimumrequirementof15.0%(Chart3.11).

CHART 3.9:Leasing FinanceTotal Loans,GrossNon-PerformingLoans andProvision forNon-PerformingLoans,2014 – 2018


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2014 2015 2016 2017 2018

Total Loans Gross NPLs Provisions for NPLs NPL Ratio

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

CHART 3.10:LeasingFinancePro�it beforeTax (Kmillion),2014 – 2018


50.8

-5.8

-243.8-276.6

-300

-250

-200

-150

-100

-50

0

50

100

2014 2015 2016 2017

Profit (Loss) BeforeTax

-49.9

2018

CHART 3.11:Leasing FinanceLiquidityTrend(Percent),2014 – 2018


0

5

10

15

20

25

30

35

40

45

50

Dec-14 Dec-15 Dec-16 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Liquid Ratio Acceptable Minimum

38

K’million

K’million

Percent

Percent

ForeignExchangeExposure

The foreign exchange exposure of the leasing �inance sub-sector was unsatisfactory. The ratio ofoverall foreign exchange exposure to regulatory capital at end-December 2018 was 40.2%, and wasabove the maximum prudential limit of 25.0%. The unsatisfactory foreign exchange exposure waslargely explained by two institutions in the sub-sector, accounting for 32.0% of the sub-sector totalassets, thatobtained �inancing fromabroad.

BuildingSocieties

The overall �inancial performance and condition of the building societies sub-sector was rated fair.This was on account of satisfactory regulatory capital. However, earnings performance, asset qualityand liquidity, were rated unsatisfactory. The largest of the three building societies, accounting for79%of thesub-sector totalassets, hadasatisfactoryrating (Table3.16).

BalanceSheet

Assets

Total assets of the building societies sub-sector increased by 13.4% to K1,230.2 million at end-December 2018, mainly due to an increase in net loans and advances and other assets. Loans andadvancescontinued toaccount for the largestproportionof thesub-sector's totalassets (Table3.17).

Liabilities

Total liabilities grew by 11.6% to K860.9 million at end-December on account of an increase inbalancesdue todomestic and foreign institutions.

CapitalAdequacy

The regulatory capital position of the building societies sub-sector was rated satisfactory at end-December 2018. Despite the capital adequacy ratio declining to 15.1% at end-December 2018 from17.2%, it remained above theminimumregulatory limit of 10.0%. The decline in the ratio arose froma lossafter taxofK34.9million (Chart3.12).

PerformanceCategory

Strong

Satisfactory

Fair

Marginal

Unsatisfactory

Total

20160

2

0

0

1

3

Table3.16:CompositeRating for theBuildingSocieties, 2016 –2018


20170

2

0

0

1

3

20180

1

1

0

1

3

Numberof BuildingSocieties2016

0

75

0

0

25

100

20170

89

0

0

11

100

20180

79

10

0

11

100

Proportionof IndustryAssets(Percent)



Others

Total

201654.2

12.1

33.7

100.0

Table 3.17:Asset Structure (Percent), 2016 - 2018


201758.8

13.6

27.6

100.0

201857.7

10.3

32.0

100.0

39

AssetQuality

As at end-December 2018, the asset quality of the building societies sub-sector was unsatisfactory.The ratio of gross NPLs to total loans at 21.3% was above the prudential maximum limit of 10.0%.The NPL coverage ratio, at 84.6%, was adequate and showed an improvement from 76.0% at end-December2017(Chart3.13).

EarningsPerformance

The earnings performance of the building societies sub-sector was unsatisfactory. The sub-sectorrecorded a loss before tax of K32.1million compared to a pro�it before tax of K0.1million reported in2017. The loss was mainly due to a 20.9% decrease in non-interest income, coupled with a 61.2%increase in theprovision for loan losses (Chart3.14).

CHART 3.12:BuildingSocietiesRegulatoryCapital(K’million),2014 – 2018


-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0


Total RegulatoryCapital Minimum RegulatoryCapital

CHART 3.13:BuildingSocieties TotalLoans, GrossNon-PerformingLoans andProvision forNon-PerformingLoans,2014 – 2018


0.0

5.0

10.0

15.0

20.0

25.0

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1,000.0

2014 2015 2016 2017 2018

Total Loans Gross NPLs Provisions for NPLs NPL Ratio

CHART 3.14:BuildingSocietiesPro�it beforeTax (K’million),2014 – 2018


-11.1

42.0

51.2

-1

-40

-30

-20

-10

0

10

20

30

40

50

60

2014 2015 2016 2017

-32.1

2018

40

K’million

K’million

Percent

K’million

Liquidity

The liquidity position of the building societies sub-sector was rated unsatisfactory. This was onaccount of a decline in the ratio of liquid assets to total deposits and short-term liabilities to 14.8%atend-December 2018 from 19.2%, which was below the prudential minimum ratio of 25.0% (Chart3.15). The reduction in the ratiowas on account of a 13.9%decrease in liquid assets, coupledwith an11.6%increase inshort-termliabilities.

MicrofinanceInstitutions

Enterprise-LendingMicrofinanceInstitutions

The overall �inancial condition and performance of the enterprise-lending Micro�inance Institutions(MFIs)26 sub-sector in2018wasmarginal. The sub-sector's liquidity positionwas satisfactory, capitaladequacywas fair,whileassetqualityandearningsperformancewereunsatisfactory.

BalanceSheet

Assets

Total assets of the enterprise lending MFIs rose by 33.2% to K565.6 million at end-December 2018.The growth in assets was due to increases of 55.1% and 24.4% in balances held with domesticinstitutions, andnet loansandadvances, respectively. Loansandadvancescontinued toconstitute thelargestproportionof totalassets (Table3.18).

Total liabilities of enterprise lending MFIs increased by 41.6% to K555.5 million at end-December2018,onaccountof increases inbalancesdue to foreign institutionsand totaldeposits.

CapitalAdequacy

The regulatory capital position of the enterprise lending MFIs sub-sector was rated fair at end-December 2018. The capital adequacy ratio decreased to 16.6% from 22.1%, mainly on account of a

CHART 3.15:BuildingSocietiesLiquidity Ratio(Percent),2014 – 2018


0

5

10

15

20

25

30

35

40


Liquidity ratio Minimum acceptable ratio




Other

Total

201774.1

1.2

8.9

15.8

100.0



201869.2

0.2

10.2

20.4

100.0

26These are MFIs whose percentage of loans to micro and small scale enterprises constitutes not less than 80% of the total loan portfolio.41

Percent

24.4% increase in the sub-sector net loans and advances. Despite the drop in the subsector capitalratio, itwasstill above theminimumregulatory limitof15.0%(Chart3.16).

AssetQuality

The asset quality of the enterprise lending MFIs sub-sector was rated unsatisfactory at end-December 2018. The ratio of NPLs to gross loans at 11.8%was above themaximumprudential limitof 10.0%. The NPL coverage ratio at 80.3%, up from 73.9% at end-December 2017, was adequate(Chart3.17).

EarningsPerformance

Earningsperformanceof the enterprise lendingMFIswas ratedunsatisfactory. The sector recordedalossbefore taxofK13.0millioncompared toa lossbefore taxofK13.6million reported in2017(Chart3.18). The marginal decrease in the loss before tax was largely attributed to an increase in interestandnon-interest income.

CHART 3.16:RegulatoryCapital of theEnterprise-Lending MFISub-Sector(Percent),2014 – 2018


-

20

40

60

80

100


Total Regulatory Capital MinimumCapital Required

CHART 3.17:Total Loans,GrossNon-PerformingLoans andProvision forNon- PerformingLoans,2014 - 2018


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

-50100150200250300350400450500

Dec-14 Dec-15 Dec-16 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Total Loans Gross NPLs Provision for NPLs NPL Ratio

CHART 3.18:Pro�it beforeTax (K' million),2014 - 2018


-2.7

-12.2

-7.3

-13.6 -13.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

2014 2015 2016 2017 201842

Percent

K’million

Percent

K’million

Consumer-LendingMicrofinanceInstitutions

The overall �inancial performance and condition of the consumer lendingMFIs sub-sector was ratedsatisfactory. The sub-sector was adequately capitalised, earnings performance and liquiditymanagementwereratedsatisfactorywhileassetqualitywasratedmarginal.

BalanceSheet

Assets

Total assets of the consumer lendingMFIs grewby33.3% toK5,187.2million at end-December2018.The growth in total assets was driven by increases in net loans and advances and balances held withdomestic �inancial institutions. Loans and advances continued to constitute the largest proportion oftotalassets (Table3.19).

Liabilities

Total liabilities of the consumer lending MFIs grew by 34.0% to K3,717.5 million at end-December2018,mainly on account of increases in deposits, balances due to domestic institutions and balancesdue to foreign institutions27.

CapitalAdequacy

The regulatory capital of the consumer lending MFIs subsector was rated satisfactory. The capitaladequacyratioat41.3%,wasabove theminimumregulatory limitof15.0%(Chart3.19).

AssetQuality

Theassetqualityof the consumer lendingMFIs sub-sectorwas ratedmarginal.NPLs, at 10.2%of totalloans, accounted for themarginal rating (Chart3.20).



Other

Total

201685.7

6.8

7.5

100.0



201786.9

5.8

7.3

100.0

201888.3

5.0

6.7

100.0

CHART 3.19:RegulatoryCapital(K’million),2014-2018


-

500

1,000

1,500

2,000

2,500


RegulatoryCapital Minimum Required Capital

27The deposits, balances due to domestic institutions and balances due to foreign institutions increased to K763.0 million, K735.8 million andK351.3million, respectively fromK547.3million,K264.5millionandK230.0million, respectively.

43

K’million

EarningsPerformance

The earningsperformanceof the consumer lendingMFIs sub-sectorwas rated satisfactory. The sub-sector'spro�it before tax increasedby31.2%toK780.7million,mainlyonaccount of a rise in interestincomearising fromthegrowth in the loanportfolio (Chart3.21).

BureauxdeChange

Thebureaude change sub-sectorwas adequately capitalised at end-December2018. All the bureauxdechange, except for three (3),met therequiredminimumprimarycapital ofK250,000.

The sub-sector's aggregate capital and reserves increased by 10.7% to K69.2 million, on account ofnewcapital injectionsandretainedearnings.

The volume of foreign currency purchases decreased by 19.1% to US$531.2 million, largely due to a19.6% decrease in foreign exchange purchases from commercial banks. Consequently, foreigncurrency sales decreased by 18.5% toUS$535.0million (Chart 3.22). The average bureau de changebuying and selling rateswereK10.4024/US$andK10.5693/US$ in 2018, compared toK9.7750/US$andK9.9374/US$ in2017, respectively.

CHART 3.20Total Loans,GrossNon-PerformingLoans andProvision forNon-PerformingLoans(K’million),2014 - 2018Source:Bank of Zambia

-

1,000

2,000

3,000

4,000

5,000

6,000


Total Loans Gross NPLs Provision for NPLs

CHART 3.21:Pro�it beforeTax of theConsumer-LendingMicro�inance(K’million),2014 - 2018


39

217247.9

594.9

780.7

-

100

200

300

400

500

600

700

800

900

2014 2015 2016 2017 2018

K'million

-

44

K’million

1.

2.

3.

1.

1.

InstitutionLicensedBureauxdeChangeBig Deal Bureau deChange Limited

MKB Bureau deChange Limited

Perfect Link Bureau deChange Limited

Microfinance InstitutionsGoodfellow Finance Limited

LeasingCompaniesAgricultural Leasing Company

Table3.20: LicencesIssued in2018


DateLicensed

9 February 2018

24April 2018

24April 2018

10 January 2018

25 September 2018

Licensing

In 2018, the Bank of Zambia issued �ive NBFIs licences and revoked another �ive (Tables 3.20 and3.21).

Operationsof theCreditReferenceBureau

In 2018, the number of credit �iles that credit providers submitted to the credit reference bureaudeclined by 36.9% to 3,510,275, while the number of credit reports searched declined by 48.4% to308,727 (Chart3.23). The reduction inbothnumberof credit �iles submittedaswell as thenumber inthe credit report searches pointed to non-compliance by credit providers with the requirement tosubmit credit information to thecredit referencebureauand tosearch its credit informationdatabaseaspartof thecreditunderwritingprocess.

CHART 3.22:Bureau deChangeVolumes ofTransactions(US$ millions),2014 – 2018


0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

2014 2015 2016 2017 2018

US$

mllions

Purchases of currency Sales of currency

1.

2.

3.

1.

1.

BureauxdeChangeDips Bureau deChange Limited

Vedette Bureau deChange Limited

A & I Bureau deChange Limited

Microfinance InstitutionsBlue Financial Services Zambia Limited

Financial BusinessesFocus Financial Services Limited

Table3.21: LicencesRevoked in2018


Date revoked

19April 2018

21 May 2018

13 June 2018

19 September 2018

19 September 2018

45

Total credit account records on the database of Credit Reference Bureau Africa Limited (CRBAL)increasedby18.3% to3,294,099, indicating a positiveprogression towards reaching criticalmass incredit information. Individuals (natural persons) comprised the largest portion of customers on theCRBAL database at 73.7%. The total number of persons (both natural and corporates) on the CRBALdatabase increasedby4.1%to1,566,287.

CHART 3.23:Trend of use ofCreditReferenceSystem byFinancialServiceProviders

Source:Credit ReferenceBureauAfrica/TransUnion

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2014 2015 2016 2017 2018

Num

berinmillions

Credit Data Searches Credit Data Submitted

46

Banking, Cur rencyand Payment Systems

4.0

4.0 BANKING,CURRENCYANDPAYMENTSYSTEMSThe Bank of Zambia continued to provide banking services to the Government and oversight to thenationalpayment system. Inaddition, theBankcontinued to implement theCleanNotePolicy.

4.1 BANKING

BankingServicestoCommercialBanks

The Bank continued to closely monitor commercial banks' current accounts to ensure that allprocessed transactions settled on time. A total of 14 commercial banks accessed Intraday Loanfacility (ILF) compared to10 in2017,while 11 commercial banksutilised theOvernight LoanFacility(OLF)compared to14 in2017.

BankingServicestotheGovernment

TheBank, as thebanker toGovernment, continued to facilitate receiptof revenueand transmissionofpayments to Government suppliers of goods and services as well as funding of line Ministries,Provinces and Spending Agencies (MPSAs). The Bank continued to support the Ministry of Financein migrating MPSAs onto the Treasury Single Account (TSA) and migrated 14 MPSAs, bringing thetotalnumberofmigratedMPSAsto58.

4.2 CURRENCYMANAGEMENT

CurrencyinCirculation

Currency in circulation increasedby12.0%toK8.2billion in 2018 compared to13.4% in2017 (Chart4.1 and Table 4.1). The bulk of this currency was banknotes, which accounted for 97.5% (K8.0billion),whilecoinsconstituted2.5%(K0.2billion).

CHART 4.1:Currency inCirculation(K 'billion),Dec 2015 –Dec 2018


3.0

4.0

5.0

6.0

7.0

8.0

9.0

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

K'billion

48

LaunchofNewBanknotes

The Bank of Zambia launched new banknotes in 2018with enhanced security features to strengthentheir security and ease veri�ication by the general public. TheBank conducted countrywide currencysensitization campaigns to educate the public on the new security features, proper storage andhandlingofbanknotesand theneed toreturnallun�it28 currency throughthebankingsystem.

NewCurrencyIssuedintoCirculation

The Bank issued 130.9 million pieces of mint banknotes and coins valued at K3.3 billion intocirculation in 2018, compared to 137.9 million pieces valued at K4.5 billion in 2017. The highestproportion of currency issued was in high value banknotes of K100 (39.1%) and K50 (45.3%). Themiddle value (K10 and K20) and low value (K2 and K5) banknotes both accounted for 15.0%, whilecoinsaccounted for0.6%(Chart4.2andTable4.2).

K100

K50

K20

K10

K5

K2

K1

50N

10N

5N

Total

20164,631,055,100

1,165,800,850

278,325,730

126,280,450

77,851,669

38,666,312

73,951,556

48,358,940

7,609,240

3,618,425

6,451,518,271

Table4.1:Currency inCirculation, 2016 –2018


20175,067,826,250

1,542,082,350

292,698,310

114,708,430

89,100,491

28,171,396

103,121,024

63,570,027

10,261,272

3,800,360

7,315,339,909

20185,266,779,300

2,159,563,300

281,913,660

108,725,660

120,835,505

49,173,344

132,235,024

63,123,927

8,452,672

3,722,859

8,194,525,251

Values(ZMW)2016

46,310,551

23,316,017

13,916,287

12,628,045

15,570,334

19,333,156

73,951,556

96,717,879

76,092,405

72,368,502

450,204,730

201750,678,263

30,841,647

14,634,916

11,470,843

17,820,098

14,085,698

103,121,024

127,140,054

102,612,720

76,007,203

548,412,464

201852,667,793

43,191,266

14,095,683

10,872,566

24,167,101

24,586,672

132,235,024

126,247,854

84,526,724

74,457,189

587,047,871

Pieces

CHART 4.2:New Currencyissued intoCirculation,2017 – 2018


0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0

0.5

1.0

1.5

2.0

2.5

K100 K50 K20 K10 K5 K2 K1 50N 10N 5N

Pieces(millions)

ValueinK'billion

Values 2017 Values 2018 Pieces 2017 Pieces 2018

4928These are banknotes that are soiled, faded or mutilated

Withdrawal ofUnfit Banknotes

The Bank withdrew a total of 82.3 million pieces of un�it banknotes valued at K3.1 billion fromcirculation in 2018, compared to 103.9 million pieces valued at K3.6 billion in 2017. The bulk of thecurrencywithdrawnwas inhighvaluebanknotes (K100andK50),whichaccounted for85.1%(Chart4.3andTable4.3).

Counterfeit notes

A total of 33,485 pieces of counterfeit noteswere detected by the Bank, commercial banks and otherGovernment security agencies in2018compared to8,845pieces in2017. The increase in counterfeitnotes detected in 2018 was accounted for by the large single interception by the Drug Enforcement

K100

K50

K20

K10

K5

K2

K1

50N

10N

5N

Total

20162,505,800,000

1,010,500,000

354,590,000

140,300,000

64,825,000

37,154,000

16,982,000

10,415,500

905,800

384,250

4,141,856,550

Table4.2: NewCurrency Issued2016 - 2018


20172,335,400,000

1,503,500,000

418,330,000

115,100,000

71,400,000

15,222,000

14,223,000

3,404,000

631,700

140,050

4,477,350,750

20181,296,800,000

1,500,750,000

277,140,000

85,490,000

96,745,000

37,804,000

15,071,000

5,359,000

110,900

7,600

3,315,287,500

Values(ZMW)2016

25,058,000

20,210,000

17,729,500

14,030,000

12,965,000

18,577,000

16,982,000

20,831,000

9,058,000

7,685,000

163,125,500

201723,354,000

30,070,000

20,916,500

11,510,000

14,280,000

7,611,000

14,223,000

6,808,000

6,317,000

2,801,000

137,890,500

201812,968,000

30,015,000

13,857,000

8,549,000

19,349,000

18,902,000

15,071,000

10,718,000

1,109,000

352,000

130,890,000

Pieces

CHART 4.3:CurrencyWithdrawnfromCirculation,2017 – 2018


0.00

5.00

10.00

15.00

20.00

25.00

0.00

0.50

1.00

1.50

2.00

2.50

K100 K50 K20 K10 K5 K2Pieces(millions)

ValueinK'billions

Values 2017 Values 2018 Pieces 2017 Pieces 2018

K100

K50

K20

K10

K5

K2

Total

2016959,764,700

826,106,525

300,557,370

148,583,665

85,118,758

60,012,838

2,380,143,856

Table4.3:CurrencyWithdrawn fromCirculation, 2016 –2018


20172,061,198,400

962,254,300

325,185,800

140,024,050

73,303,155

38,212,164

3,600,177,869

20181,615,045,300

985,543,200

277,468,600

94,645,000

63,968,500

20,551,000

3,057,221,600

Values(ZMW)2016

9,597,647

16,522,131

15,027,869

14,858,367

17,023,752

30,006,419

103,036,183

201720,611,984

19,245,086

16,259,290

14,002,405

14,660,631

19,106,082

103,885,478

201816,150,453

19,710,864

13,873,430

9,464,500

12,793,700

10,275,500

82,268,447

Pieces

50

Commission at one of the borders in January2018 and the enhanced collaborationbetween theBankand the security agencies. TheBankand security agencies continued to sensitise thepublic onhowtoidentifygenuinebanknotesand issuedpress releases toalert thepublic (Table4.4andTable4.5).

4.3 PAYMENTSYSTEMS

The performance of the national payment systemswas generally satisfactory, as re�lected in the highsystemsavailability levels and improvements invaluesandvolumesof transactionsprocessed.

ZambiaInterbankPayment andSettlement System

The Zambia Interbank Payment and Settlement System (ZIPSS) continued to operate satisfactorily.The system's availability remained high at 99.1% compared to 98.3% reported in 2017. Thedowntime recordedwasmainly due to network connectivity and application challenges, whichwereresolvedwithinacceptable timeframes.

The volume of transactions processed on ZIPSS increased by 16.0% to 573,071 in 2018, while thevalue of transactions rose by 21.1% to K968.3 billion (Chart 4.4). The surge in both volumes andvalues of processed transactions was mainly due to increased interbank payments among theparticipatingcommercial banks.

DenominationK100

K50

K20

K10

K5

K2

Total

20161,064

357

119

6

11

2

1,559

Table4.4:Counterfeit NotesDetected, 2016 - 2018


20178,535

218

73

8

11

0

8,845

201832,778

227

461

10

9

0

33,485

Denomination

K100

K50

K20

K10

K5

K2

Total

BankofZambia

89

44

91

1

1

0

226

Table4.5: Counterfeit NotesinterceptionbyOrganisation, 2018


CommercialBanks928

171

165

2

2

0

1,268

DrugEnforcementCommission

28,633

1

0

0

0

0

28,634

ZambiaPolice3,073

5

204

7

6

0

3,295

Others55

6

1

0

0

0

62

Total32,778

227

461

10

9

0

33,485

51

ChequeImageClearingSystem(CIC)

The volume and value of cheques cleared through the Cheque Image Clearing system in 2018declined by 13.0% and 41.0% to 2,040,530 and K12.4 billion, respectively (Chart 4.5). The declinewasexplainedbythereduction in the itemvalue limitoncheques introduced in2017.

ChequesReturnedUnpaidonAccount of Insufficient Funds

The volume and value of cheques returned unpaid due to insuf�icient funds in 2018 decreased by13.0% and 26.0% to 14,285 and K0.13 billion, respectively (Chart 4.6). This was on account of thereduction in the item value limits for cheques that minimised the use of cheques as a mode ofpaymentand increasedadoptionofelectronicpaymentmethods.

CHART 4.4:ZIPSS Volumesand Values,2014 - 2018


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

0

200

400

600

800

1,000

1,200

2014 2015 2016 2017 2018

Volumes

Value(K'million)

Value Volume

CHART 4.5:ChequeImagesCleared2014 – 2018


-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2014 2015 2016 2017 2018

Volume

ValuesK'billion

Values Volumes

CHART 4.6:UnpaidCheques2014 – 2018


-

5,000

10,000

15,000

20,000

25,000

30,000

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2014 2015 2016 2017 2018

Volume

ValuesK'billion

Values Volume52

ElectronicFundsTransfer (EFT) ClearingSystem

The volume and value of Electronic Funds Transfer (EFT) transactions processed on the paymentstreams in 2018 increased by 18.0% and 54.0% to 6,952,305 and K59.7 billion, respectively (Chart4.7). The effects of the revision of the item value limits revision signi�icantly contributed to theincrease inboth thevolumeandvalueofEFTtransactions.

TransactionsProcessedthroughtheAutomatedTeller Machines

Thevolumeof transactionsprocessedon theAutomatedTellerMachines (ATMs)decreasedby10.0%to 44,726,867 in 2018 against an increase of 5.6% in 2017. In terms of value, ATMs processedtransactions increased by 8.0% to K45.6 billion in 2018, compared to a rise of 10.6% in 2017 (Chart4.8). The increase in the value of transactions was partly due to the increase in the number of cardsissued to customersby8.0%to3,492,750 in2018. ThenumberofATMsalso rose to1,104 from1,066in2017.

TransactionsProcessedthroughPoint ofSaleTerminals

The volume of transactions processed on Point of Sale (PoS) terminals increased by 51.0% to18,409,724 in 2018, while the value of transactions increased by 68.0% to K13.5 billion (Chart 4.9).This was due to increased deployment of PoS terminals and promotion of the usage of electronicpaymentmethods. The number of PoS terminals increased to 13,090 in 2018 from12,522 in 2017. Intermsof payments processedby card type, debit cards recorded thehighest increase in both volumesandvalueof transactionsprocessedat54.0%and76.0%, respectively.

CHART 4.7:ElectronicFunds TransfersProcessed2014 – 2018


-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2014 2015 2016 2017 2018

Volumes

ValuesK'billion

Values Volumes

CHART 4.8:AutomatedTeller MachineTransactions,2014 – 2018


-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

2014 2015 2016 2017 2018

Volumes

ValuesK'billion

Values Volumes

53

InternationalRemittances

International in-bound remittances increased by 16.0% in 2018 to 502,368 in volume terms and by25.0% to K1,144.5 million in value terms (Chart 4.10). This was largely on account of increasedremittances by Zambians living abroad. The United States of America, the United Kingdom andCanadadominatedthesourcecountries.

Out-bound international remittances increased in2018 in volume termsby14.0%to341,474andby16.0% toK1.0 billion in value terms (Chart 4.11). This wasmainly on account of an increase in traderemittances toChina,TanzaniaandSouthAfrica.

CHART 4.9:Transactionson POSTerminals2014 – 2018


-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

2014 2015 2016 2017 2018

Volumes

ValuesK'billion

Values Volumes

CHART 4.10:InboundRemittances2014 – 2018


-

75,000

150,000

225,000

300,000

375,000

450,000

525,000

600,000

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2014 2015 2016 2017 2018

Volumes

ValuesK'billions

Value Volume

CHART 4.11:OutboundRemittances2014 – 2018


-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

0.0

0.2

0.4

0.6

0.8

1.0

2014 2015 2016 2017 2018

Volumes

ValuesK'billion

Value (K' m) Volume

54

MobileMoneyTransactions

The volume and value of transactions processed on mobile money platforms in 2018 rose by 76.0%and187.0%to305,208,616andK22.5billion, respectively (Chart4.12).

The increase in both volume and value was partly driven by an increase in the issuance of second-generation products, such as micro loans, supported by collaborations between mobile moneyoperators and both Micro Finance Institutions and banks. The collaborations with banks allowedmobile money customers the ability to make transfers between mobile money wallets and bankaccounts, thus making mobile wallets more appealing to commercial bank customers. Theemergence of Fintech companies with solutions tailored to customer needs in both rural and urbanareasalso supportedthisgrowth.

RegionalCrossBorder PaymentSystems

In 2018, the volume of payments processed on the SADC Integrated Regional Electronic SettlementSystem (SIRESS) by Zambian commercial banks contracted by 7.9% to 20,008, while the valuemarginally increased by 0.6% to ZAR5.7 billion. The volume of receiptsmarginally declined by 0.1%to6,942 transactions in2018,while thevalue increasedby5.2%toK5.7billion.Onanetbasis, Zambiapaid out ZAR7.9million in 2018 compared to net payment of ZAR256.3 billion in 2017. For the SADCregion, a total of ZAR1,272.4 billion was processed on the SIRESS in 2018, representing a 2.6%increase fromZAR1,240.1billion recorded in2017.

Under the COMESA Regional Electronic Payments and Settlement System (REPSS), there was anincrease in the volume and value of receipts in 2018 to 110 transactions and US$11.1 million,respectively, compared to a single transaction valued at US$245,035.00 in 2017. There were nopaymentsmade fromZambiaon theplatform.

National Financial Switch

The Bank of Zambia in conjunction with the Zambia Electronic Clearing House Limited (ZECHL), theBankers Association of Zambia (BAZ) and other stakeholders continued with efforts to implementthe National Financial Switch (NFS). A total of 13 out of the 14 commercial banks offering ATM andcard services,went live on theNFS in 2018.However, progresson thePoint of Sale (PoS) functionalitywasslowwithvery fewbankscarryingoutend-to-endtesting.

The second phase of the NFS project continued to make progress in 2018. The NFS project team incollaboration with the Bank of Zambia and other stakeholders commenced the development ofparticipationrules for interoperabilityofmobilemoney.

CHART 4.12:Mobile MoneyTransactions2014 – 2018


-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

-

5.00

10.00

15.00

20.00

25.00

2014 2015 2016 2017 2018

Volumes

Values(K'billion)

Values Volumes

55

Regulatory and Other FinancialSector Developments

5.0

5.0 REGULATORYANDOTHERFINANCIALSECTORDEVELOPMENTSThe BoZ continued to review laws, regulations and policies, as well as implement new measures tostrengthen its oversight role over institutions under its supervisory ambit. In 2018, developmentsthat tookplace in the �inancial sector in this regardareoutlinedbelow:

Legal andRegulatoryReforms

The Banking and Financial Services Act (BFSA)No. 7 of 2017 became effective in 2018. The revisionsto the BFSA include enhanced consumer protection and corporate governance provisions.Consequently, the Bank of Zambia has been empowered to adequately enforce consumer protectionmeasures inorder topromotethecon�idenceand trustof consumers in the �inancial system.

RegulationofBankChargesandFees

Following a review of commercial banks charges and fees, the Bank of Zambia issued a Directive onthe Prohibition of Unwarranted Charges and Fees in August 2018 in order to protect consumers of�inancial servicesandproducts fromunjusti�iedchargesand fees.

PaymentSystemsRegulations

The Bank of Zambia revised the National Payment SystemsDirectives on ElectronicMoney Issuance.Thekeychanges tothedirectives include the following:

a) Permitting customers to hold multiple wallets. However, prescribed transaction limits for theaggregatee-valueremainunchanged;

b) Permitting both commercial banks and approved non-bank �inancial institutions to host HoldingAccounts;

c) Inclusionof speci�icguidanceon theuseof interest earnedontheHoldingAccounts;d) Provisions for consumer protection and the need for e-money institutions to have procedures for

dealingwithcustomercomplaints;e) Requirement for an e-money institution to hold customer funds at various commercial banks or

non-bank �inancial institutions.

Lender ofLastResort PolicyFramework

The revised Bank of Zambia Lender of Last Resort Framework was approved by the Bank of ZambiaBoard of Directors inDecember 2018. The thrust of the revisionwas to strengthen the framework toallow the Bank to effectively exercise its function as lender of last resort by meeting liquidityrequirements of banksanddeposit taking �inancial institutions eligible toaccess emergency liquidityassistance fromtheBank.

CollateralRegistry

The Bank of Zambia, in partnershipwith the Patents and Companies Registration Agency, conductedsensitisationworkshops in24 rural districts across the country inorder toaccelerate theusageof theMovable PropertyRegistry System. The objective of theworkshopswas to realise the full potential ofthe movable property registry system. The workshops were funded by the Rural Finance ExpansionProgramme.

Restructuringof IntermarketBankingCorporation

The Bank of Zambia concluded the restructuring of Intermarket Banking Corporation Limitedresulting in the formation of the Zambia Industrial Commercial Bank Limited (ZICB) which 57

commenced operations on 1August 2018. All depositorswere paid except for a few large depositorswhoconvertedtheirdeposit liabilities intoequityof theZICB.

NationalPaymentSystemsVisionandStrategy2022

The Bank of Zambia issued the new National Payment System Vision and Strategy document,covering the period 2018 to 2022. The strategy is intended to build on the progressmade under theNational Payment System Vision 2017. A number of key issues were included in the vision andstrategydocument.Thenewinclusions included the following:

a) Amendmentof theNationalPaymentSystemsAct toensureharmonisationwithother lawsand totake account of new developments in payment systems and ensure alignment with the SADCModelLaw;

b) Enhancementof consumerprotectiontosafeguardandprotectconsumers;c) Enhancement of cyber security in the �inancial sector in order to maintain the integrity of

paymentsystems;d) PromotionofDigitalFinancial Services; ande) EnhancementofRemittanceServicesmarket toencourageuptakeof formal remittancechannels.

Financial Inclusion

In2018, theBoZcontinued toundertakevarious initiativesaimedatexpandingaccess toandusageofformal �inancial services. Some of the activities implemented included the annual Financial LiteracyWeekandtheWorldSavingsDay.

Financial LiteracyWeek

The 2018 Financial Literacy Week, under the theme: 'Save, Invest, Insure- To LiveaBetter Life', wascommemoratedduring theweek18–24March2018.The themeemphasizedonempoweringpeopleto understand the available �inancial products and services for the various key life events as well ascreate momentum on both the supply and demand side for the development of consumer centric�inancialproductsandservices.

WorldSavingsDay

The2018World SavingsDaywas commemoratedon31October2018, under the theme 'Save,Invest,Insure: What Do You Wish For?' This event emphasised the importance of saving for nationaleconomiesand individuals.

58

Strategy and Risk Management6.0

6.0 STRATEGYANDRISKMANAGEMENTPerformanceof theStrategicPlan

The Bank continued to implement the 2016-2019 Strategic Plan under the theme “Excellence inExecution”. A mid-term review of the Plan was conducted without signi�icant changes. The Bankachieved an overall effective execution rate of 82.0% as at the end of 2018, compared to 62.9% in2017.Signi�icantprogresswasattained in the followingareas:

! Enhancement of alternative instruments for implementing monetary policy in response to theeverchangingeconomicenvironment,

! EstablishmentofElectronicBureaudeChangeMonitoring,! Deepening of the domestic capital, money and foreign exchangemarkets in order to enhance the

transmissionofmonetarypolicy, and! Implementationof theNationalFinancial Switch.

ProjectManagement

EnterpriseRiskManagement

The Bank, in collaboration with other stakeholders, conducted business continuity management(BCM)market-wide simulation tests with a view to establishing the Bank's level of preparedness inthe event of a disruptive incident. The tests were successful and infrastructure was resumedwithintherecovery timeobjective.

Gender Mainstreaming

In 2018, theBank approved theGenderPolicy and Strategy,whichacts as a catalyst in in�luencing the�inancial sector to be more gender responsive. This policy is meant to mitigate the numerouschallenges towomen's �inancial inclusion.

Further, the Bank continued to roll out the Female and Male Operated Small Enterprises (FAMOS)tool in the �inancial sector and collect sex-disaggregated data in order to encourage the widespreadproductionanduseof supply anddemand-side sex-disaggregateddataonwomen's access toanduseof �inancial services.

60

Human Resour ce Management7.0

7.0 HUMANRESOURCEMANAGEMENTStructureandStaffing

The total number of staff in employment as at end December 2018 stood at 533, of which 327 weremale and 206 were female, against an establishment of 679. This staff complement comprised 322(60%) on Fixed-Term Employment Contracts and 211 (40%) employees on Permanent andPensionableService (Tables7.1and7.2).

StaffMovements

In 2018, the Bank recruited a total of 29 employees across various departments (Table 7.3), while 31separated from the Bank (Table 7.4). The separations were due to expiry of contracts, medicaldischarge, resignations, statutoryearly retirementsandvoluntary separations.

Functions

Executive

SubtotalCoreDepartmentsBank Supervision

Banking, Currency & Payment Systems

Economics

Financial Markets

Non-Banks Financial Institutions Supervision

Strategy & Risk Management

SubtotalSupport ServicesBoard Services

Finance

Human Resources

Information &CommunicationsTechnology

Legal Services

Internal Audit

Procurement &Maintenance Services

Security

SubtotalRegionalOffice

SubtotalTOTAL

Estab.15

15

46

84

45

36

38

13

279

19

36

22

35

8

17

92

91

32062

62676

Actual11

11

30

63

42

32

24

10

212

11

22

19

31

8

15

70

63

23962

62524

Diff-4

-4

-16

-21

-3

-4

-14

-3

-67

-8

-14

-3

-4

0

-2

-22

-28

-810

0-152

Estab.15

15

54

85

56

36

43

13

287

21

37

26

35

9

17

85

85

31562

62679

Actual10

10

42

68

43

31

38

9

231

12

33

21

31

7

13

76

45

23856

56535

Diff-5

-5

-12

-17

-13

-5

-5

-4

-56

-9

-4

-5

-4

-2

-4

-9

-40

-77-6

-6-144

Estab.15

15

54

85

56

36

43

13

287

21

37

26

35

9

17

85

85

31562

62679

Actual12

12

44

72

41

32

36

10

235

15

34

19

30

7

16

71

40

23254

54533

Diff-3

-3

-10

-13

-15

-4

-7

-3

-52

-6

-3

-7

-5

-2

-1

-14

-45

-83-8

-8-146

2016 2017 2018

Table 7.1:StaffingLevels, 2016 - 2018


LocationLusaka

Ndola

Overall

M125

13

138

Table7.2: Distributionof Staff byLocation, Gender andEmployment Type in2018


F62

11

73

SubTotal187

24

211

Permanent &PensionableM175

14

189

F119

14

133

FixedTermContractSubTotal

294

28

322

GrandTotal481

52

533

62

StaffWelfare

The industrial relations climate remained cordial in 2018 despite the non-conclusion of thenegotiations for the2018-2020CollectiveAgreement.

Further, the Bank continued to offermedical services to its employees and their immediate families.As part of the employee welfare programme, the Bank also organised a number of health awarenessprogrammesduring theyear.

CapacityBuildingProgrammes

The Bank continued to provide capacity building programmes through relevant workshops andseminars both locally and abroad. In addition, somemembers of staff are currently pursuing variousprogrammes toupgrade theirquali�ications (Table7.5).

DepartmentBank Supervision

Banking, Currency & Payment Systems

Board Services

Financial Markets

Human Resources

Information &CommunicationsTechnology

Internal Audit

Procurement &Maintenance Services

RegionalOffice

Total

Table7.3:StaffRecruitmentsin2018


Number2

6

3

4

4

2

3

2

3

29

Modeof SeparationExpiry of Contracts

Medical Discharge

Resignations

Statutory Early Retirements

Voluntary Separations

Total

Table7.4:StaffSeparationsin2018


Number2

2

5

7

15

31

Programme

PhD/DBA

Masters Degrees

Bachelor's Degrees

ProfessionalQualifications

TOTAL

20165

3

0

3

11

Table 7.5: Numberof StudentsPursuingStudyProgrammes, 2016 –2018

20175

3

0

3

11

20185

0

0

2

7

Year


63

Financial Statements for the yearended 31 December 2018

8.0

BANKOFZAMBIA

FINANCIALSTATEMENTSFORTHEYEARENDED 31 DECEMBER2018

Contents Page

Statement of Directors' responsibilities 66

Report of the independent auditor 67

Statement of comprehensive income 69

Statement of �inancial position 70

Statement of changes in equity 71

Statement of cash �lows 72

Notes to the �inancial statements 73 - 116

65

BANK OF ZAMBIA

STATEMENTOFDIRECTORS'RESPONSIBILITIES

The Bank of Zambia Act, No. 43 of 1996 requires the Directors to keep proper books of accounts and other records relating to itsaccounts and to prepare financial statements for each financial year which present fairly the state of affairs of the Bank of Zambia andof its profit or loss for theperiod.

The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accountingpolicies supported by reasonable estimates, in conformity with International Financial Reporting Standards and the requirements ofthe Bank of Zambia Act, No. 43 of 1996. The Directors are of the opinion that the financial statements give a true and fair view of thestate of the financial affairs of the Bank and of its financial performance in accordance with International Financial ReportingStandards. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in thepreparation of financial statements, and for such internal controls as the Directors determine necessary to enable the preparation offinancial statements that are free frommaterialmisstatement, whether due to fraudor error.

Nothing has come to the attention of the Directors to indicate that the Bank will not remain a going concern for at least twelvemonthsfrom thedate of this statement.

Approval of the financial statements

The financial statements of the Bank set out on pages 69 to 116 were approved by the Board of Directors on 18 March, 2019 andsignedon their behalf by:

Governor Director

66

REPORTOFTHE INDEPENDENTAUDITORTOTHEMEMBERSOFBANKOFZAMBIA

Reporton the Audit of the Financial Statements

OpinionWe have audited the financial statements of Bank of Zambia, which comprise the statement of financial position as at 31 December2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year thenended, andnotes to the financial statements, including a summary of significant accountingpolicies.

In our opinion, the financial statements give a true and fair view of the financial position of Bank of Zambia as of 31 December 2018,and of its financial performance and its cash flows for the year then ended in accordance with International Financial ReportingStandards.

Basis forOpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standardsare further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Bank in accordance with the International Ethics Standards Board for Accountant's Code of Ethics forProfessional Accountants (IESBACode togetherwith the ethical requirements that are relevant to our audit of the financial statementsin Zambia, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the auditevidencewehaveobtained is sufficient andappropriate to provide abasis for our opinion.

KeyAuditMattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financialstatements of the current period. Thesematters were addressed in the context of our audit of the financial statements as awhole, andin formingour opinion thereon, andwedonot provide a separate opinionon thesematters.

GrantThorton5th Floor MukubaPension HouseDedan Kimathi RoadP. O. Box 30885Lusaka, Zambia

T + 260 (211) 227722-8F + 260 (211) [email protected]

2.

Partners

Edgar Hamuwele [Managing]Christopher MulengaWesley BeeneRodia MusondaChilala Banda

Chartered AccountantsZambia Member of Grant Thorton InternationalVAT reg 1001696100. Registered in Lusaka. Company number 8116Grant Thornton Zambia and other member firms are not a worldwide partnership. GTI and each member firm is separate legal entity.Services are delivered independently by the member firms. GTI and itsmember firms are not agents, and do not obligate, one anotherand are not liable for one another’s acts or omissions.

Audit Tax Advisory

www.gt.com.zm 67

Descriptionofmatter

Classification, measurement and impairment offinancial assets

The Bank applied IFRS 9 “financial instruments” for thefirst time in the financial period under review.

The directors are required to review the classificationsof assets and align the classifications to therequirements of the reporting standards. The directorsalso reviewed the fair valuations and impairmentmodels.

Due to the complex and subjective judgementsrequired in estimating the timing and valuation ofimpairment and in estimating the fair value of assets,thiswas considereda key auditmatter.

Howmatterwasaddressed

We reviewed the classification of the financial assets to ensurecompliancewith the reporting standards.

We reviewed the valuation and verified the calculation of the fair values.Wealso verified the inputs used in the valuations.

In considering the reasonableness of the impairment provision, wereviewed the assumptions used in impairment calculations.

We further assessed their recoverability through testing of current yearand subsequent receipts.

Based on the procedures performed, we are satisfied that the impairmentprovision is reasonable and the financial assets were properly classifiedand valued.

REPORTOFTHE INDEPENDENTAUDITORTOTHEMEMBERSOFBANKOFZAMBIA

ResponsibilitiesofManagement andThoseChargedwithGovernance for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancial Reporting Standards and for such internal control as management determines is necessary to enable the preparation offinancial statements that are free frommaterialmisstatement, whether due to fraudor error.

In preparing the financial statements, management is responsible for assessing the Bank's ability to continue as a going concern,disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless managementeither intends to liquidate theBankor to ceaseoperations, or has no realistic alternative but to do so.

Those chargedwith governance are responsible for overseeing theBank's financial reporting process.

Auditor'sResponsibilities for theAudit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from materialmisstatements, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is ahigh-level assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financialstatements.

As part of an audit in accordancewith ISAs, we exercise professional judgement andmaintain professional skepticism throughout theaudit. Wealso:

! Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

! Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, but not for thepurpose of expressing anopinion on the effectivenessof theBank's internal control.

! Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relateddisclosuresmadebymanagement.

! Conclude on appropriateness of management's use of the going concern basis of accounting and, based on the auditevidence obtained, whether amaterial uncertainty exists related to events or conditions thatmay cast significant doubt on theBank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor's report to the related disclosures in the financial statements, or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.However, future events or conditionsmaycause theBank to cease to continue as agoing concern.

! Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whetherthe financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the auditand significant audit findings, including significant deficiencies in internal control thatwe identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirementsregarding independence, and to communicate with them all relationships and othermatters thatmay reasonably be thought to bearon our independence, andwhere applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance inthe audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, wedetermine that amatter should not be communicated in our report because the adverse consequences of doing sowould reasonablybeexpected to outweigh thepublic interest benefits of such communication.

ReportonOther Legal andRegulatoryRequirementsIn our opinion, the financial statements of Bank of Zambia as of 31 December 2018 have been properly prepared in accordance withthe Bank of Zambia Act No 43 of 1996, and the accounting and other records and registers have been properly kept in accordancewith theAct.

CharteredAccountants

ChristopherMulenga (AUD/F000178)Name ofPartner signingonbehalf of the Firm

Lusaka

Date: 18March201968

BANKOFZAMBIA

STATEMENTOFCOMPREHENSIVE INCOMEFORTHEYEARENDED31DECEMBER2018

Note

55

66

7

89

23, 2410

20

2023

Interest incomeInterest expense

Net interest income

Fee and commission incomeFee and commission expense

Net fee and commission income

Net income from foreign exchange transactionsOther gains

Net income from foreign exchange transactions and other gains

Net income

Net impairment credit on financial assetsEmployee benefitsDepreciation and amortisationOperating expenses

Net expense

Profit for the year

Other comprehensive income

Items that will not be reclassified to profit or lossDividend converted to shares in AfreximbankFair value and exchange rate adjustment on equity investment in

AfreximbankRevaluation surplus

Total other comprehensive income

Total comprehensive income for the year

The notes on pages 73 to 116 are an integral part of these financial statements.

2018K000

1,067,041(34,345)

1,032,696

203,595(5,089)

198,506

91,7142,723,879

2,815,593

4,046,795

6,262(456,730)(30,800)(241,073)

(722,341)

3,324,454

3,156

26,626129,849

159,631

3,484,085

2017K'000

1,753,163(116,599)

1,636,564

203,228(3,828)

199,400

32,185193,762

225,947

2,061,911

41,966(408,707)(34,642)(355,811)

(757,194)

1,304,717

-

--

-

1,304,717

69

2017K'000

2,94220,776,662

39789,543

7,903,2212,047,82717,88329,950

3,367,16612,533,602451,2341,697

47,222,124

3,070,5606,582,976184,423167,9027,417,862291,457836,333

12,533,6021,365,7186,655,65439,106,487

500,0201,798,905230,5705,586,142

8,115,637

47,222,124

BANKOFZAMBIA

STATEMENTOFFINANCIALPOSITION - 31DECEMBER2018

Note

121314151618202122,332324

2627282930313222,333436

37383838

AssetsDomestic cash in handForeign currency cash and bank accountsItems in course of settlementDomestic financial assets at FVOCILoans and advancesDomestic financial assets at amortised costOther assetsEquity investments at FVOCIIMF funds recoverable from Government of the Republic of ZambiaIMF subscriptionsProperty, plant and equipmentIntangible assetsTotal assets

LiabilitiesDeposits from the Government of the Republic of ZambiaDeposits from financial institutionsForeign currency liabilities to other institutionsOther depositsNotes and coins in circulationOther liabilitiesProvisionsDomestic currency liabilities to IMFForeign currency liabilities to IMFSDR allocationTotal liabilities

EquityCapitalGeneral reserve fundProperty revaluation reserveRetained earnings

Total equity

Total liabilities and equity

The financial statements on pages 69 to 116 were approved for issue by the Board of Directors on 18 March, 2019 and signed on itsbehalf by:

Governor Director

2018K'000

4,70018,756,737

23789,543

7,038,5753,994,08562,904138,0324,042,31313,748,378610,1992,166

48,487,869

1,840,7155,222,16326,68976,041

8,297,047179,83946,159

13,748,378729,4447,779,94237,946,417

500,0201,929,377354,5847,757,471

10,541,452

48,487,869

70

Balance at 1 January 2017

Profit for the yearAmortisation of revaluation surplus relating to

propertiesTotal comprehensive income

Transactions with owners:Amortised cost adjustment on the capitalization

bondTotal transactions with ownersBalance at 31 December 2017Changes on initial application of IFRS 9

Impairment on other assetsFair value adjustment on equityinvestment in Afreximbank

Profit for the yearTransfer to general reserve fundOther comprehensive income:Amortisation of revaluation surplus relating to

propertiesTotal comprehensive income

Transactions with owners:Dividend paid to shareholders'Unwinding of fair value adjustment on repayment

of capitalization bondTotal transactions with ownersBalance at 31 December 2018

Note

SharecapitalK'000

500,020

-

--

--

500,020

-

----

--

-

--

500,020

Generalreserve

fundK'000

1,798,905

-

--

--

1,798,905

-

--

130,472-

-130,472

-

--

1,929,377

Propertyrevaluation

reserveK'000

235,507

-

(4,937)(4,937)

--

230,570

-

---

129,849

(5,835)124,014

-

--

354,584

Retainedearnings

K'000

4,262,292

1,304,717

4,9371,309,654

14,19614,196

5,586,142

(1,028)

78,3003,324,454(130,472)29,782

5,8353,306,871

(1,174,298)

38,756(1,135,542)7,757,471

The notes on page 73 to 116 are an integral part of these financial statements.

BANKOFZAMBIA

STATEMENT OF CHANGES IN EQUITYFORTHEYEARENDED31DECEMBER2018

TotalEquityK'000

6,796,724

1,304,717

-1,304,717

14,19614,196

8,115,637

(1,028)

78,3003,324,454

-159,631

-3,561,357

(1,174,298)

38,756(1,135,542)10,541,452

71

2017K'000

1,304,717

34,642(2,563)(732)

-(18,441)(23,525)326,820177,063

1,797,981

1,058(557)

(1,110,025)(22,718)(1,236)18,441

(365,291)778,7901,454,157(5,161,601)144,562116,045112,162(778,790)(428,232)863,722422,036

(2,159,496)(7,155)2,563

(14,147)-

--

(2,178,235)

(38,364)1,728

(36,636)

(2,186,528)23,292,952(326,820)

20,779,604

2,94220,776,662

20,779,604

2018K'000

3,324,454

30,800(1)

(115)(214)(6,048)

-(1,298,749)

1,006

2,051,133

160-

864,646(1,946,258)(44,807)6,048

(675,147)(1,214,776)(1,229,845)(1,360,813)(157,734)(91,861)(111,618)1,214,776(636,274)879,1851,124,288(1,328,897)(791,180)

1-

38,756

(1,028)(1,174,298)(3,256,646)

(60,393)123

(60,270)

(3,316,916)20,779,6041,298,749

18,761,437

4,70018,756,737

18,761,437

BANKOFZAMBIA

STATEMENTOFCASHFLOWSFORTHEYEARENDED31DECEMBER2018

Note

23, 24

888

32

32

23, 24

Cash flows from operating activitiesProfit for the yearAdjustment for:- Depreciation/amortisation- Dividend income- (Profit) on disposal of property, plant and equipment- Impairment effect on other assets- Impairment effect on amounts due from closed banks- Impairment effect on loans and advances- Effects of exchange-rate changes on cash and cash equivalents- Provisions made during the year

Changes in operating assets and liabilitiesChange in items in course of settlementChange in domestic financial assets held at FVOCIChange in loans and advancesChange in domestic financial assets held at amortised costChange in other assetsChange in amounts due from closed banksChange in IMF funds receivable from Government of the Republic of ZambiaChange in IMF subscriptionChange in deposits from the Government of the Republic of ZambiaChange in deposits from financial institutionsChange in foreign currency liabilities to other institutionsChange in other depositsChange in other liabilitiesChange in domestic currency liabilities to IMFChange in foreign currency liabilities to IMFChange in notes and coins in circulationChange in SDR allocation

Provisions paidDividends receivedReadjusted fair value on capitalization bondUnwinding of fair value adjustment on repayment of capitalisation bondFair value adjustment on equity investment in Afreximbank on initial application

of IFRS9Dividends paid to shareholdersNet cash outflow from operating activities

Cash flows from investing activitiesPurchase of property, plant and equipment and intangible assetsProceeds from sale of property, plant and equipmentNet cash used in investing activities

Net change in cash and cash equivalentsCash and cash equivalents at the beginning of the yearEffects of exchange-rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the year

Cash and cash equivalents at the end of the year comprises:Domestic cash in handForeign currency cash and bank accounts

Cash and cash equivalents excluding effects of exchange rate changes72

1 Principal activity

TheBank of Zambia is the central bank of Zambia, which is governed by the provisions of theBank of Zambia Act No. 43 of1996. TheBank's principal placeof business is at BankSquare,CairoRoad, Lusaka.

In these financial statements, theBankof Zambia is also referred to as the “Bank” or “BoZ”.TheBank is 100per cent ownedby theGovernment of theRepublic of Zambia.

TheBoard ofDirectors approved these financial statements for issue on18March, 2019.

2 Principal accountingpolicies

Theprincipal accounting policies applied in the preparation of these financial statements are set out below. Thesepolicies havebeenconsistently applied to all the years presented, unless otherwise stated:

2.1 Basisof preparation

The Bank's financial statements have been prepared in accordance with the International Financial ReportingStandards (IFRS) issued by the International Accounting Standards Board (IASB). The financial statements have beenprepared on the historical cost basis except for the revaluation of certain non-current assets and financial instrumentsthat aremeasured at fair values, as explained in the accounting policies below. Historical cost is generally based on thefair value of the considerationgiven in exchange for assets.

The preparation of financial statements in conformitywith IFRS requires the use of certain critical accounting estimates.It also requires the directors to exercise judgement in the process of applying the Bank's accounting policies. Changesin assumptions may have a significant impact on the financial statements in the period the assumptions changed. Theareas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significantto the financial statements aredisclosed inNote 3.

(a) NewStandardseffective 1 January2018

(i) IFRS 15 'Revenue fromContractswithCustomers'IFRS 15 'Revenue from Contracts with Customers' and the related 'Clarifications to IFRS 15 RevenuefromContracts with Customers' (hereinafter referred to as 'IFRS 15') replace IAS 18 'Revenue', IAS 11'ConstructionContracts', and several revenue-related Interpretations.

In accordance with the transition guidance, IFRS 15 can only been applied to contracts that areincomplete as at 1 January 2018. The newStandard has not been applied retrospectively as theBankdid not have any revenue from contracts with customers, as at 1 January 2018, that required achange in either the valuationor timingof income.

LosscontractsIFRS 15 does not include any guidance on how to account for loss contracts. Accordingly, suchcontracts are accounted for using the guidance in IAS 37 'Provisions, Contingent Liabilities andContingent Assets'.

The Bank also notes that the amount of loss accrued in respect of a loss contract under IAS 11 takesinto account an appropriate allocation of construction overheads. This contrasts with IAS 37 whereloss accrualsmaybe lower as they are basedon the identification of 'unavoidable costs'.

As at 1 January 2018, theBankhas not identified any loss provisions relating to contracts.

Contractswithmultiple performance obligationsUnder IFRS 15, the Bank must evaluate the separability of the promised goods or services based onwhether they are 'distinct'. A promisedgoodor service is 'distinct' if both:

! The customer benefits from the item either on its own or together with other readily availableresources, and

! It is 'separately identifiable' (i.e. the Bank does not provide a significant service integrating,modifyingor customising it).

While this represents significant new guidance, the implementation of this new guidance did nothave a significant impact on the timing or amount of revenue recognised by the Bank in any year. Inassessing the impact of IFRS 15, the Bank undertook an exercise to determine revenue streamsfalling within its scope and those that are governed by different standards. The conclusion of theexercise was that IFRS 15 accounts for an insignificant portion of the Bank's income of around 4 percent of total revenue with the reminder arising mainly from the operation of financial instrumentswhich are accounted for independently under other standards.

BANKOFZAMBIA

NOTESTOTHEFINANCIALSTATEMENTSFORTHEYEARENDED31DECEMBER2018

73

2. Principal accountingpolicies (Continued)

(a) NewStandardseffective 1 January2018 (Continued)

(i) IFRS 15 'Revenue fromContractswithCustomers'(Continued)

(ii) IFRS9 'Financial Instruments’

IFRS 9 replaces IAS 39 'Financial Instruments: Recognition and Measurement'. It makes majorchanges to the previous guidance on the classification and measurement of financial assets andintroduces an 'expected credit loss'model for the impairment of financial assets.

When adopting IFRS 9, the Bank applied transitional relief and opted not to restate prior periods.Differences arising from the adoption of IFRS 9 in relation to classification, measurement, andimpairment are recognised in retainedearnings.

IFRS 9 also contains new requirements on the application of hedge accounting. The newrequirements look to align hedge accounting more closely with entities' risk management activitiesby increasing the eligibility of both hedged items and hedging instruments and introducing a moreprinciples-based approach to assessing hedge effectiveness. The Bank does not currently applyhedge accounting requirements which are necessary when financial instruments are used as a toolto manage exposures arising from particular risks that could affect profit or loss (P&L) or othercomprehensive income (OCI). The adoptionof IFRS9 impacted the followingareas:

! Theclassification andmeasurement of theBank's financial assets as follows:

Loans and advances toGovernment, commercial banks and staff that are classified as loans andreceivables and measured at amortized cost under IAS 39 will continue to be measured atamortized cost under IFRS9;

Held-to-maturity financial assetsmeasured at amortized cost under IAS 39 will still bemeasuredat amortized cost under IFRS9;

Held-for-trading financial assets which were measured at FVTPL under IAS 39, will now insteadbemeasured at FVOCI under IFRS9;

The Bank's foreign reserve assets, which comprise assets under stewardship of fund managersfor the improvement of returns and other balances heldmainly for transaction andprecautionarypurposes are currently measured at FVTPL under IAS 39. However, under IFRS 9 they will bemeasuredunder FVOCI.

The Bank's equity investments in Afreximbank and Electronic Clearing House were classified asavailable-for-sale andmeasured at cost, as permitted under IAS 39, due to their non-marketablenature. Under IFRS 9, they are required to bemeasured at FVTPL. However, due to the long termand strategic nature of the investments, the Bank designated the two investments to bemeasuredat FVOCI as permittedunder IFRS9.

! The impairment of financial assets applying the expected credit lossmodel.

In accordance with IFRS 9, impairment applies on loans, debt securities and other financialinstruments classified as financial assets at amortized cost and financial assets at fair valuethrough comprehensive income. Therefore, the Bank's financial assets, within the scope forimpairment are loans and advances, the Bank's holdings of securities and foreign currencydeposits and investments.

BANKOFZAMBIA


74

BANKOFZAMBIA



(a) NewStandardseffective 1 January2018 (Continued)

(i) IFRS 15 'Revenue fromContractswithCustomers'(Continued)

(ii) IFRS9 'Financial Instruments’(Continued)

On the date of initial application, 1 January 2018, the financial instruments of the Bank werereclassifiedas follows:

As illustrated above, the effect of adopting IFRS 9 on the carrying amounts of financial assets at 1January 2018 relates solely to fair value adjustments on the equity investment inAfreximbank.

Further, a loss of K1.028million was recorded on application of IFRS 9 on the outstanding balance offormer staff debtors contained inOther Assets balance – see note 8.

There have been no changes to the classification or measurement of financial liabilities as a result ofthe application of IFRS9.

Reconciliationof statement of financial position balances from IAS39 to IFRS9at 1 January 2018

75

Domestic financial assets at FVOCIEquity investments at FVOCI

Financial assets at amortised cost

Loans and advances

Foreign currency cash and bankaccountsTotal financial asset balances

Original IAS39 category

Held-for-tradingAvailable-for-saleHeld-to-maturityLoans andreceivablesFVTPL

New IFRS 9category

FVOCIEquityinvestments at FVOCIAmortised cost

Amortised cost

FVOCI

Closingbalance 31December

2017 (IAS 39)K'000

89,543

29,9502,047,827

7,903,221

20,776,662

30,847,203

Adoptionof IFRS 9

K'000

-

78,300-

-

-

78,300

Openingbalance 1

January 2018(IFRS 9)

K'000

89,543

108,2502,047,827

7,903,221

20,776,662

30,925,503

Measurement category Carrying amount

Financial assets

Fair value through profit and lossAvailable for sale financial assetsHeld-for-tradingForeign currency cash and bank accountsTotal financial assets measured at FVTPLAmortised costHeld-to-maturityLoans and advancesTotal financial assets measured at

amortised costFair value through other comprehensive

incomeAvailable for sale financial assetsHeld-for-tradingForeign currency cash and bank accountsTotal financial assets measured at FVOCITotal financial asset balances,reclassification and remeasurement at 1January 2018

IAS 39 carryingamount 31December

2017

29,95089,543

20,776,66220,896,155

2,047,8277,903,221

9,951,048

----

30,847,203

Reclassification

(29,950)(89,543)

(20,776,662)(20,896,155)

--

-

29,95089,543

20,776,66220,896,155

-

Remeasurement

----

--

-

78,300--

78,300

78,300

IFRS 9carryingamount 1

January 2018

----

2,047,8277,903,221

9,951,048

108,25089,543

20,776,66220,974,455

30,925,503

Retainedearnings

effect

----

--

-

78,300--

78,300

78,300


(b) Other Standards and amendments that are effective for the first time in2018 and couldbe applicable totheBank are:

! Annual Improvements to IFRS2014-2016Cycle (Amendments to IFRS1and IAS 28);! Applying IFRS9 'Financial Instruments' with IFRS4 'InsuranceContracts' (Amendments to IFRS4);! Classification andMeasurement of Share-basedPayment Transactions (Amendments to IFRS2); and! IFRIC22 'ForeignCurrencyTransactions andAdvanceConsideration.’

These amendments do not have a significant impact on these financial statements and therefore disclosureshavenot beenmade.

(c) Standards, amendments and Interpretations to existing Standards that are not yet effective and havenotbeenadopted earlyby the Bank

At the date of authorisation of these financial statements, new, but not yet effective, Standards, amendmentsto existing Standards, and Interpretations have been published by the IASB. None of these Standards,amendments or Interpretations havebeenadopted early by theBank.

Management anticipates that all relevant pronouncementswill be adopted for the first period beginning on orafter the effective date of the pronouncement. New Standards, amendments and Interpretations neitheradopted nor listed below have not been disclosed, as they are not expected to have amaterial impact on theBank's financial statements.

IFRS16 'Leases’

IFRS 16 will replace IAS 17 'Leases' and three related Interpretations. It completes the IASB's long runningproject to overhaul lease accounting. Leaseswill be recorded in the statement of financial position in the formof a right-of-use asset and a lease liability. There are two important reliefs provided by IFRS 16 for assets oflow value and short-term leasesof less than 12months.

IFRS 16 is effective from periods beginning on or after 1 January 2019. Early adoption is permitted; however,theBankdecidednot to early adopt.

Management is in the processof assessing the full impact of theStandard. So far, it hasbeen assessed that:

! The Bank is a lessor in most of its leasing arrangements mainly involving the leasing of property. Lessoraccounting remains largely unchanged from IAS 17 and accounting for rentals will continue as currentlydone;

! The assets for which the Bank is a leasee and which IFRS 16 requires to be recognised on the statementof financial position are immaterial. These involve renting of limited space within established businessoperations to carry out specified Bank business. As at 31 December 2018 the average annual leasepayments on a leaseby lease basiswasK46,560 including fees formanagement of the facilities

! After applying the practical expedient option which permits an explicit recognition and measurementexemption for leases of small value or those for which the term endswithin 12months or fewer of the dateof initial application and account for those leases as short-term leases the Bank has assessed that thereare currently no leases for which a right-of-use asset would be required to be recognised on thestatement of financial position.

This will mean that the nature of the expense of the above cost will remain as an operating lease expenseand not charged to depreciation and interest expense as required by IFRS 16 when accounting forleasee's transactions.

The Bank is planning to adopt IFRS 16 on 1 January 2019 using the Standard modified retrospectiveapproach. Under this approach, the cumulative effect of initially applying IFRS 16 is recognised as anadjustment to equity at thedate of initial application.Comparative information is not restated.

Choosing this transition approach results in further policy decisions the Bank needs to make, as there areseveral other transitional reliefs that can be applied. These relate to those leases previously held as operatingleases and can be applied on a lease-by-lease basis. The Bank is currently assessing the impact of applyingtheseother transitional reliefs.

IFRS 16 has notmade any significant changes to the accounting for lessors, and therefore the Bank does notexpect any changes for leaseswhere they are acting as a lessor.

BANKOFZAMBIA


76


(c) Standards, amendments and Interpretations to existing Standards that are not yet effective and havenotbeenadopted earlyby the Bank (Continued)

IFRS16 'Leases' (Continued)

(d) Functional and presentationcurrency

These financial statements are presented in Zambian Kwacha, the currency of the primary economicenvironment in which the Bank operates. Zambian Kwacha is both the Bank's functional and presentationcurrency. Except where indicated financial information presented in Kwacha has been rounded to thenearest thousand.

(e) Interest income and expense

Interest income and expense for all interest-bearing financial instruments are recognised in the profit or losswithin 'interest income' and 'interest expense' using the effective interest method. The effective interestmethod is amethod of calculating the amortised cost of a financial asset or financial liability and of allocatingthe interest incomeor interest expenseover the relevant period.

The effective interest rate is the rate that exactly discounts the estimated future cash payments and receiptsthrough the expected life of the financial asset or liability (or, where appropriate, a shorter period) to thecarrying amount of the financial asset or liability. When calculating the effective interest rate, the Bankestimates future cash flows considering all contractual terms of the financial instrument but does notconsider future credit losses.

The calculation of the effective interest rate includes all fees paid or received, transaction costs, anddiscounts or premiums that are an integral part of the effective interest rate. Transaction costs areincremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset orliability

Interest incomeandexpensepresented in the statement of comprehensive income include:

! Interest on financial assets and liabilities at amortised cost calculated onan effective interest basis; and

! Interest on financial assets at FVOCI calculatedon aneffective interest basis.

Once a financial asset or a group of similar financial assets has been written down as a result of animpairment loss, interest income is recognised using the rate of interest used to discount the future cashflows for thepurpose ofmeasuring the impairment loss.

(f) Fees and commission income

Fees and commissions, including account servicing fees, supervision fees, licensing and registration fees,are generally recognisedon anaccrual basiswhen the related service has beenperformed.

(g) Dividend income

Dividend income from investments is recognised when the shareholder's right to receive payment has beenestablished (provided that it is probable that the economic benefits will flow to the Bank and the amount ofrevenue canbemeasured reliably).

(h) Rental income

Rental income fromoperating leases is recognised on a straight-line basis over the termof the relevant lease.Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amountof the leasedasset and recognisedona straight-linebasis over the lease term.

(i) Foreigncurrency transactionsandbalances

In preparing the financial statements of the Bank, transactions in foreign currencies are recognised at therates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetaryitemsdenominated in foreign currencies are retranslated at the rates prevailing at that date.

77

BANKOFZAMBIA


2) Principal accountingpolicies (Continued)

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at therates prevailing at the date when the fair value was determined. Non-monetary items that are measured intermsof historical cost in a foreign currency are not retranslated.

Exchangedifferences are recognised in profit or loss in the period inwhich they arise.

Foreign exchange differences arising on translation are recognised in the profit or loss, except fordifferences arising on the translation of equity instruments at FVOCI that are recognised directly in othercomprehensive income.

(j) Financial instruments

Financial assets and financial liabilities are recognised when the Bank becomes a party to the contractualprovisionsof the instrument.

Financial assets

All financial assets are recognised on the trade datewhere the purchase or sale of a financial asset is under acontract whose terms require delivery of the financial asset within the timeframe established by the marketconcerned, and are initiallymeasuredat fair value, plus transaction costs.

(i) ClassificationIFRS 9 contains new classification and measurement conditions for financial assets, based on thebusiness model for managing such assets as well as their cash flow characteristics. It introducesthree principal classification categories for financial assets: measured at amortised cost, fair valuethrough other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). IFRS 9eliminates the existing IAS39 categories of held-to-maturity, loans and receivables and available-for-sale.

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debtinvestment; FVOCI – equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Bank changesits business model for managing financial assets, in which case all affected financial assets arereclassifiedon the first dayof the first reportingperiod following the change in thebusinessmodel.

A financial asset is measured at amortised cost if it meets both of the following conditions and is notdesignatedas at FVTPL:

! It is held within a business model whose objective is to hold assets to collect contractual cashflows: and

! Its contractual terms give rise on specified dates to cash flows that are solely payments ofprincipal and interest (SPPI) on the principal amount outstanding.

A financial asset is measured at FVOCI only if it meets both of the following conditions and is notdesignatedas at FVTPL:

! It is held within a business model whose objective is achieved by both collecting contractualcash flows and selling financial assets: and

! Its contractual terms give rise on specified dates to cash flows that are SPPI on the principalamount outstanding.

On initial recognition of an equity investment that is not held for sale, the Bankmay irrevocably electto present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.

All other financial assets not classified at amortised cost or FVOCI as described above aremeasuredat FVTPL. The Bank may if desired irrevocably designate a financial asset that otherwise meetsrequirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates orsignificantly reduces the accountingmismatch thatwould otherwise arise.

78

BANKOFZAMBIA



(j) Financial instruments (Continued)

Financial assets (Continued)

(i) Classification

Assessmentof applicable businessmodelThe Bank assesses the business model for newly originated or newly purchased financial assets atportfolio level because this best reflects the way the financial instruments are managed and howinformation is provided tomanagement.

The features assessedmay include:! In case of variable interest instruments, determination of the significance of impact of a rate reset

on cash flows;! Extent to which contractual terms, such as prepayment callable or extension, could change the

timingor amount of cash flows;! For asset backed securities to assess underlying assets to determine if they are classified as

SPPI.

(ii) Subsequentmeasurement

Subsequent measurement, gains, and losses applicable from 1 January 2018 in respect of financialassets are as follows:

Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interestor dividend income, are recognised in profit or loss.

No financial assets were designated at FVTPL during the period. This was due to the fact that nofinancial assetswere found to havebeenmanagedwith performance evaluated solely on the basis offair value changes, in accordance with the Bank's documented risk management or investmentstrategy.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. Theamortised cost is reduced by impairment losses. Interest income, foreign exchange gains andlosses and impairment are recognised in profit or loss. Any gain or loss on derecognition isrecognised in profit or loss.

TheBank has classified the following financial assets as financial assets at amortised cost:! GRZconsolidatedbond;! OtherGRZ securities;! Staff savings securities; and! Loans and receivables, which include budgetary advances to Government, credit to banks and

staff loans.

Debt investmentsat FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effectiveinterest method, foreign exchange gains and losses and impairment are recognised in profit or loss.Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulatedinOCI are reclassified toprofit or loss.

The Bank has designated its foreign reserves portfolio and domestic securities used in monetarypolicy operation at FVOCI.

TheBank has classified its foreign reserves portfolio at FVOCI becausemost investments are held fortheir contractual cash flows, however, whenever necessary the Bank could potentially sell itsholdings for re-balancing or liquidity needs. Therefore, the Bank considers that FVOCI gives themost appropriate reflection of the business model for managing the Bank's foreign reservesportfolio.

79

BANKOFZAMBIA




(ii) Subsequentmeasurement (Continued)

Equity investmentsat FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profitor loss unless the dividend clearly represents a recovery of part of the cost of the investment. Othernet gains and losses are recognised inOCI andare never reclassified toprofit or loss.

The Bank has irrevocably designated at FVOCI, equity investments in Afrexinbank and ZambiaElectronic Clearing House Limited (ZECHL). The Bank chose this classification alternative becauseboth investments were made for strategic purposes rather than with a view to profit on subsequentsale. There are noplans to disposeoff these investments in the short ormedium term.

The fair value of these investments was K138.032 million as at 31 December 2018. No dividend wasrecorded during the period in respect of ZECHL. However, K3.156 million was recognised as adividend thatwas converted into additional shares in Afreximbank.

(i) Derecognition

The Bank de-recognises financial assets or a portion thereof when the contractual rights to the cashflows from the asset expire, or it transfers the rights to receive the contractual cash flows on thefinancial asset in a transaction in which substantially all the risks and rewards of ownership of thefinancial asset are transferred. If the Bank neither transfers nor retains substantially all the risks andrewards of ownership and continues to control the transferred asset, the Bank recognises itsretained interest in the asset and an associated liability for amounts it may have to pay. If the Bankretains substantially all the risks and rewards of ownership of a transferred financial asset, the Bankcontinues to recognise the financial asset and also recognises a collateralised borrowing for theproceeds received.

The Bank also derecognises a financial liability when its terms aremodified and the cash flows of themodified liability are substantially different, in which case a new financial liability based on themodified terms is recognised at fair value.

(ii) Impairment

IFRS 9's impairment requirements use more forward-looking information to recognise expectedcredit losses – the 'expected credit loss (ECL)model'. This replaces IAS39's 'incurred lossmodel'.

Instruments within the scope of the new requirements included loans and other debt-type financialassets measured at amortised cost and FVOCI, trade receivables, contract assets recognised andmeasured under IFRS 15 and loan commitments and some financial guarantee contracts (for theissuer) that are notmeasuredat fair value throughprofit or loss.

Recognition of credit losses is no longer dependent on the Bank first identifying a credit loss event.Instead the Bank considers a broader range of information when assessing credit risk andmeasuring expected credit losses, including past events, current conditions, reasonable andsupportable forecasts that affect the expected collectability of the future cash flows of theinstrument.

In applying this forward-looking approach, a distinction ismadebetween:

! Financial instruments that have not deteriorated significantly in credit quality since initialrecognitionor that have lowcredit risk ('Stage 1'); and

! Financial instruments that have deteriorated significantly in credit quality since initial recognitionandwhose credit risk is not low ('Stage 2').

! Stage 3' would cover financial assets that have objective evidence of impairment at the reportingdate. '12-month expected credit losses' are recognised for the first category while 'lifetimeexpected credit losses' are recognised for the second category.

80

BANKOFZAMBIA




Financial assets (Continued)

(ii) Impairment (Continued)

Determiningwhether there issignificant increase incredit risk

When determining whether the credit risk of a financial asset has increased significantly since initialrecognition andwhenestimatingECLs, theBank considers reasonable and supportable informationthat is relevant and available without undue cost or effort. This includes both quantitative andqualitative information and analysis, based on the Bank's historical experience and informed creditassessment and including forward-looking information.

The Bank assumes that the credit risk on a financial asset has increased significantly if it is more than30days past due.

Definitionofdefault

TheBank considers a financial asset to be in default when:

! The borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by theBank to actions such as realising security (if any is held); or

! The financial asset ismore than 90days past due.

The Bank considers a debt security to have low credit risk when its credit risk rating is equivalent tothe globally understood definition of 'investment grade'. The Bank considers this to be Baa3 orhigher per [RatingAgencyX] or BBB-or higher per [RatingAgencyY].

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of afinancial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12months after the reporting date (or a shorter period if the expected life of the instrument is less than12months).

MeasurementofECL

ECLs are a probability-weighted estimate of credit losses. Credit losses aremeasured as the presentvalue of all cash shortfalls (i.e. the difference between the cash flows due to the Bank in accordancewith the contract and the cash flows that the Bank expects to receive). ECLs are discounted at theeffective interest rate of the financial asset.

Financial liabilities

(i) Classification

Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.

Financial liabilities atFVTPL

Financial liabilities are classified as at FVTPLwhen the financial liability is either held for trading or it isdesignatedas at FVTPL at initial recognition.

A financial liability is classifiedas held for trading if:

! It has beenacquired principally for thepurpose of repurchasing it in the near term; or! On initial recognition it is part of a portfolio of identified financial instruments that the Bank

manages together andhas a recent actual pattern of short-termprofit-taking; or! It is a derivative that is not designated andeffective as a hedging instrument.

A financial liability other than a financial liability held for tradingmay be designated as at FVTPL uponinitial recognition if:

! Such designation eliminates or significantly reduces a measurement or recognitioninconsistency thatwouldotherwise arise; or 81

BANKOFZAMBIA




Financial liabilities (Continued)

(i) Classification (Continued)

! The financial liability formspart of a groupof financial assets or financial liabilities or both, whichismanaged and its performance is evaluated on a fair value basis, in accordancewith the Bank'sdocumented risk management or investment strategy, and information about the grouping isprovided internally on that basis; or

! It forms part of a contract containing one or more embedded derivatives, and IAS 39 FinancialInstruments: Recognition and Measurement permits the entire combined contract (asset orliability) to bedesignated as at FVTPL.

TheBanks hasnot classifiedany financial liabilities asFVTPL.

(ii) Derecognitionof financial liabilities

A financial liability is de-recognised when the Bank's contractual obligations have been discharged,cancelledor expired.

(k) Other financial liabilities

Other financial liabilities, includingborrowings, are initiallymeasured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method,with interest expense recognisedonan effective yield basis.

(l) Determinationof fair value

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction betweenmarket participants at themeasurement date.

When a quoted price is available, the Bankmeasures the fair value of an instrument using the quoted price inanactivemarket for that instrument.

If a market for a financial instrument is not active, the Bank establishes fair value using appropriate valuationtechniques. Valuation techniques include using recent arm's length transactions between knowledgeable,willing parties (if available), reference to the current fair value of other instruments that are substantially thesame, discounted cash flow analyses and option pricing models. The chosen valuation technique makesmaximum use of market inputs, relies as little as possible on estimates specific to the Bank, incorporates allfactors that market participants would consider in setting a price, and is consistent with accepted economicmethodologies for pricing financial instruments. Inputs to valuation techniques reasonably representmarketexpectations andmeasures of the risk-return factors inherent in the financial instrument. The Bank calibratesvaluation techniques and tests them for validity using prices from observable current market transactions inthe same instrument or basedonother available observablemarket data.

(m) Offsetting

The Bank offsets financial assets and liabilities and presents the net amount in the statement of financialposition when and only when, there is a legally enforceable right to offset the recognised amounts and thereis an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.Income and expenses are presented on a net basis only when permitted by the accounting standards or forgains and losses, arising fromagroupof similar transactions suchas theBank's trading activity.

(n) Property, plant and equipment

i) Property

Properties held for use in the production or supply of goods or services, or for administrative purposes,are stated in the statement of financial position at their revalued amounts, being the fair value at the dateof revaluation, less any subsequent accumulated depreciation and subsequent accumulatedimpairment losses. TheBankobtains an independent valuation of properties every five years.82

BANKOFZAMBIA



(n) Property, plant and equipment (Continued)

i) Property (Continued)

Any revaluation increase arising on the revaluation of such property is recognised in othercomprehensive income, except to the extent that it reverses a revaluation decrease for the same assetpreviously recognised in profit or loss, in which case the increase is credited to profit or loss to the extentof the decrease previously expensed. A decrease in the carrying amount arising on the revaluation ofsuch buildings is recognised in profit or loss to the extent that it exceeds the balance, if any, held in theproperties revaluation reserve relating to a previous revaluation of that asset.

(ii) Plant and equipment

Items of plant and equipment are stated in the statement of financial position at cost less accumulateddepreciation and accumulated impairment losses.

(iii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the item's carryingamount only when it is probable that future economic benefits associated with the item will flow to theBank and the cost of the item can be measured reliably. The costs of day-to-day servicing of property,plant and equipment are charged to the profit or loss during the financial period in which they areincurred.

When parts of an item of property or equipment have different useful lives, they are accounted for asseparate items (major components) of property, plant andequipment.

iv) Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of eachpart of an item of property, plant and equipment to write off the depreciable amount of the various assetsover the periodof their expected useful lives.

Depreciation on revalued buildings is recognised in profit or loss. On the subsequent sale or retirement ofa revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve istransferred directly to retained earnings. A portion of the surplus equal to the difference betweendepreciation based on the revalued carrying amount of the asset and depreciation based on the asset'soriginal cost is transferred as the asset is used by the Bank. The transfers from revaluation surplus toretainedearnings are notmade throughprofit or loss.

Other assets are stated at cost less accumulateddepreciation and accumulated impairment losses.

Thedepreciation rates for the current andcomparative period are as follows:

The assets' residual values, depreciation methods and useful lives are reviewed, and adjusted ifappropriate, at each reporting date.

83

BuildingsFixtures and fittingsPlant and machineryFurnitureSecurity systems and other equipmentMotor vehiclesArmoured Bullion VehiclesArmoured Escort VehiclesComputer equipment - hardwareOffice equipment

20182%4%5%10%

10-20%25%10%16.7%25%33.3%

20172%4%5%10%

10-20%25%10%16.7%25%33.3%

BANKOFZAMBIA


2 Principal accountingpolicies (Continued)

(n) Property, plant and equipment (Continued)

(i) De- recognition

An item of property, plant and equipment is derecognised upon disposal or when no future economicbenefits are expected to arise from the continued use of the asset. Any gain or loss arising on thedisposal or retirement of an item of property, plant and equipment is determined as the differencebetween the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

(ii) Capitalwork-in-progress

Capital work-in-progress represents assets in the course of development, which at the reporting datehavenot beenbrought into use.Nodepreciation is chargedoncapital work-in-progress.

(o) Intangible assets - computer software

(i) Intangible assets acquiredseparately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulatedamortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basisover their estimated useful lives. The estimated useful life and amortisation method are reviewed at theend of each reporting period, with the effect of any changes in estimate being accounted for on aprospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried atcost less accumulated impairment losses.

(ii) Internally-generated intangible assets

An internally generated intangible asset arising fromdevelopment (or from the development phase of aninternal project) is recognised if, andonly if, all of the followinghavebeendemonstrated:

! The technical feasibility of completing the intangible asset so that it will be available for use or sale;! The intention to complete the intangible asset anduseor sell it;! Theability to use or sell the intangible asset;! How the intangible assetwill generate probable future economicbenefits;! The availability of adequate technical, financial and other resources to complete the development

and to useor sell the intangible asset; and! The ability to measure reliably the expenditure attributable to the intangible asset during its

development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditureincurred from the date when the intangible asset first meets the recognition criteria listed above. Whereno internally generated intangible asset can be recognised, development expenditure is recognised inprofit or loss in theperiod inwhich it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost lessaccumulated amortisation and accumulated impairment losses, on the same basis as intangible assetsthat are acquired separately.

(p) Impairment of non-financial assets

The carrying amounts of theBank's non-financial assets that are subject to depreciation and amortisation arereviewed at each reporting date to determine whether there is any indication of impairment. If any suchindication exists, then the asset's recoverable amount is estimated. An asset's carrying amount is writtendown immediately to its recoverable amount if the asset's carrying amount is greater than its estimatedrecoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and valuein use. In assessing value in use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risksspecific to the asset.

Impairment losses are recognised in profit or loss otherwise in equity if the revalued properties are impairedto the extent that an equity reserve is available.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications thatthe loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in theestimates used to determine the recoverable amount. An impairment loss is reversed only to the extent thatthe asset's carrying amount does not exceed the carrying amount that would have been determined, net ofdepreciationor amortisation if no impairment loss hadbeen recognised.

84

BANKOFZAMBIA



(q) Employee benefits

(i) Defined contributionplan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions into a separate entity and will have no legal or constructive obligation to pay furtheramounts. Obligations for contributions to defined contribution pension plans are recognised as anemployee benefit expense in the profit or loss when they are due. Prepaid contributions are recognisedas an asset to the extent that a cash refundor a reduction in future payments is available.

The Bank contributes to the Statutory Pension Scheme in Zambia, namely National Pension SchemeAuthority (NAPSA) where the Bank pays an amount equal to the employees' contributions. Membership,with the exceptionof expatriate employees is compulsory.

(ii) Defined benefit plan

The Bank provides for retirement benefits (i.e. a defined benefit plan) for all permanent employees inaccordance with established pension scheme rules as well as the provisions of Statutory Instrument No.119 of the Laws of Zambia. A defined benefit plan is a post-employment benefit plan other than a definedcontributionplan.

The cost of providing the defined benefit plan is determined annually using the Projected Unit CreditMethod, with actuarial valuations being carried out at the end of each reporting period. The discount rateis required to be determined with reference to the corporate bond yield, however, due to the non-availability of an active developed market for corporate bonds the discount rate applicable is the yield atthe reporting date on the GRZ bonds that have maturity dates approximating the terms of the Bank'sobligations and that are denominated in the samecurrency inwhich the benefits are expected tobepaid.

The defined benefit obligation recognised by the Bank, in respect of its defined benefit pension plan, iscalculated by estimating the amount of future benefit that employees have earned in return for theirservice in the current and prior periods and discounting that benefit to determine its present value, thendeducting the fair value of any plan assets.

When the calculations above result in a benefit to the Bank, the recognised asset is limited to the lower ofany surplus in the fund and the 'asset ceiling' (i.e. the present value of any economic benefits available inthe formof refunds from theplanor reductions in future contributions to the plan).

Actuarial gains and losses arising fromchanges in actuarial assumptions are chargedor credited to othercomprehensive income when they arise. These gains or losses are recognised in full in the year theyoccur. Past-service costs are recognised immediately in the profit or loss, unless the changes to thepension plan are conditional on the employees remaining in service for a specified period (the vestingperiod). In this case, thepast-service costs are amortisedon a straight-linebasis over the vestingperiod.

(iii) Terminationbenefits

Termination benefits are recognised as an expense when the Bank is demonstrably committed, withoutrealistic possibility of withdrawal, to a formal detailed plan to either terminate employment before thenormal retirement date, or to provide termination benefits as a result of an offer made to encouragevoluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense ifthe Bank hasmade an offer of voluntary redundancy, it is probable that the offer will be accepted, and thenumber of acceptances canbeestimated reliably.

The Bank has a device referred to as Voluntary Early Separation Scheme (VESS) designed to exitpermanent and pensionable staff who volunteer under the rules and conditions as defined and approvedby the Board of Directors. VESS costs are recognised as an expense in full when the Bank approves aseparation request of amember of staff whomeets eligibility conditions stipulated under theVESS rules.

(iv) Short-termbenefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed asthe related service is provided.

A liability is recognised for the amount expected to be paid under short-termcash bonus, gratuity or leavedays if the Bank has a present legal or constructive obligation to pay this amount as a result of pastserviceprovidedby the employeeand theobligation canbe estimated reliably.

85

BANKOFZAMBIA



(q) Employee benefits (Continued)

(v) Other staffbenefits

The Bank also operates a staff loans scheme for its employees for the provision of facilities such ashouse, car and other personal loans. From time to time, the Bank determines the terms and conditionsfor granting of the above loans with reference to the prevailing market interest rates and may determinedifferent rates for different classesof transactions andmaturities.

In cases where the interest rates on staff loans are below market rates, a fair value calculation isperformed using appropriate market rates. The Bank recognises, a deferred benefit to reflect the staffloan benefit arising as a result of this mark to market adjustment. This benefit is subsequently amortisedto the profit or loss on a straight-line basis over the remainingperiod tomaturity (seeNote 15).

(r) Cash and cashequivalents

For the purposes of the statement of cash flows, cash and cash equivalents include notes and coins on hand,unrestricted balances held with other central banks and highly liquid financial assets with original maturitiesof less than threemonths, which are subject to insignificant risk of changes in their fair value, and are used bythebank in themanagement of its short-termcommitments.

Cashand cashequivalents are carried at fair value in the statement of financial position.

(s) Transactionswith the InternationalMonetaryFund ("IMF")

The Bank is the GRZ's authorized agent for all transactions with the IMF and is required to record alltransactions between the IMF and the GRZ in its books as per guidelines from the IMF. The Bank thereforemaintains different accounts of the IMF: the IMF subscriptions, securities account, and IMF No. 1 and No. 2accounts.

The Bank revalues IMF accounts in its statement of financial position in accordance with the practices of theIMF's Treasury Department. In general, the revaluation is effected annually. Any increase in value is paid bythe issue of securities as stated abovewhile any decrease in value is affected by the cancellation of securitiesalready in issue. These securities are lodged with the Bank acting as custodian and are kept in physical formas certificates at theBankand they formpart of the records of theGRZ.

The IMF Subscriptions account represents the GRZ's subscription to the IMF Quota and is reported as anasset under the heading IMF Subscription. This Quota is represented by the IMF Securities, IMF No.1 andNo. 2 accounts which appear in the books of the Bank under the heading “Domestic currency liabilities toIMF”.

The Quota is fixed in Special Drawing Rights and may be increased by the IMF. Any increase in the quota issubscribed in local currency by way of non-negotiable, non-interest bearing securities issued by GRZ infavour of the IMF, which are repayable on demand. There is also a possibility that the increase in the quotamay be subscribed in any freely convertible currency, of which the value of the portion payable would bedebited to the account ofGRZmaintainedwith theBank.

(u) Provisions

Provisions are recognised when the Bank has a present legal or constructive obligation as a result of pastevents for which it is probable that an out-flow of resources embodying economic benefits will be required tosettle the obligation, and a reliable estimate of the amount of the obligation can be made. The amountrecognised as a provision is the best estimate of the consideration required to settle the present obligation atthe end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash flows estimated to settle the present obligation, its carryingamount is thepresent valueof those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from athird party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be receivedand the amount of the receivable canbemeasured reliably.

(v) Currency incirculation

Currency issued by the Bank represents a claim on the Bank in favour of the holder. The liability for currencyin circulation is recorded at face value in the financial statements. Currency in circulation represents the facevalue of notes and coins issued to commercial banks and Bank of Zambia cashiers. Unissued notes andcoins held by theBank in the vaults donot represent currency in circulation.

86

BANKOFZAMBIA



(w) Currencyprintingandmintingexpenses

Notes printing and coins minting expenses which include ordering, printing, minting, freight, insurance andhandling costs are expensed in the period the cost is incurred.

(x) Sale and repurchase agreements

Securities sold subject to repurchase agreements ('repos') are classified in the financial statements aspledged assets with the counterparty liability included in Term deposits from financial institutions. Securitiespurchased under agreements to resell ('reverse repos') are recorded as loans and advances to commercialbanks.

The Bank from time to time withdraws money from the market ('repos') or injects money into the economy('reverse repos'), through transactions with commercial banks, to serve its monetary objectives or deal withtemporary liquidity shortages in the market. In the event of the Bank providing overnight loans ('reverserepos') to commercial banks, the banks pledge eligible securities in the form of treasury bills andGRZ bondsas collateral for this facility.

A 'repo' is an arrangement involving the sale for cash, of securities at a specified price with a commitment torepurchase the sameor similar securities at a fixedprice either at a specific future date or atmaturity.

3 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Bank's accounting policies, which are described in note 2 -'significant accounting policies', theDirectors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilitiesthat are not readily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant and reasonable under the circumstances. Actual results may differfrom these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revisionand future periods if the revision affects both current and future periods.

Summarised below are areas where the directors applied critical accounting judgements and estimates that may have themost significant effect on the amounts recognised in the financial statements.

3.1 Realised foreignexchange revaluationgains

In establishing, the amounts recognised as realised foreign exchange gains or losses in the profit or loss, the Bankapplies first in first out (FIFO) basis for valuation of foreign exchange stock sold. Management appraises theappropriateness of valuation techniques used and ensures consistency in such methods from period to period andacross currencies and assets sold. Further information regarding the impact of realised foreign exchange revaluationgains on theBank's performance is contained in note 7.

3.2 Defined benefitsobligations

Whereas the directors relied on a qualified Actuary to determine the present value of the retirement benefitobligations the assumptions and judgements used by the Actuary were considered by the directors and deemedreasonable in the light of the prevailing and anticipated future economic conditions. Seealso note 35.

3.3 Measurementof the expected credit lossallowance

Themeasurement of the expected credit loss allowance for financial assetsmeasured at amortised cost andFVOCI isan area that requires the use of complex models and significant assumptions about future economic conditions andcredit behavior (e.g. The likelihoodof default and the resulting losses).

A number of significant judgements are also required in applying the accounting requirements for measuring ECL,suchas:! Determining criteria for significant increases in credit risk;! Choosingappropriatemodels and assumptions formeasuringof ECL;

87

BANKOFZAMBIA


3 Critical accounting judgementsand keysourcesof estimationuncertainty (Continued)

3.4 Fair Valuemeasurement

Management uses valuation techniques to determine the fair value of financial instruments (where active marketquotes are not available) and non-financial assets. This involves developing estimates and assumptions consistentwith howmarket participants would price the instrument. Management bases its assumptions on observable data asfar as possible but this is not always available. In that case, management uses the best information available.Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at thereportingdate

3.5 Useful livesofdepreciatable assets

Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on theexpected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may changetheutility of certain software and IT equipment.

4 Riskmanagement policies

(a) Overviewand riskmanagement framework

TheBank has exposure to the following risks fromfinancial instruments:

! Credit risk;! Liquidity risk; and! Market riskwhich include interest rate risk, currency risk andother price risk.

This note presents information about the Bank's exposure to each of the above risks, the Bank's objectives,policies and processes for measuring and managing risk, and the Bank's management of capital.

In its ordinary operations, the Bank is exposed to various financial risks, which if not managed may have adverseeffects on the attainment of the Bank's strategic objectives. The identified risks are monitored and managedaccording to an existing and elaborate internal control framework. To underscore the importance of riskmanagement in the Bank, the Board has established a Risk Management Department, whose role is to co-ordinate the Bank-wide framework for risk management and establish risk standards and strategies for themanagement and mitigation of risks.

The Audit Committee and the Risk Management Committee oversees how Directors monitor compliance with theBank's risk management policies and procedures and reviews the adequacy of the risk management frameworkin relation to the risks faced by the Bank. The Audit Committee is assisted in its oversight role by Internal Audit.Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, theresults of which are reported to the Audit Committee.

The Board of Directors has ultimate responsibility for ensuring that sound risk management practices are in placethat enable the Bank to efficiently and effectively meet its objectives. The approach of the Board is to ensure thefollowing conditions are enhanced:

i) Active Board and senior management oversight. Management maintains an interest in the operations andensures appropriate intervention is available for identified risks.

ii) Implementation of adequate policies, guidelines and procedures. The existing policies, procedures andguidelines are reviewedand communicated to relevant users tomaintain their relevance.

iii) Maintain risk identification, measurement, treatment and monitoring as well as control systems. Managementreviews riskmanagement strategies andensures that they remain relevant.

iv) Adequate internal controls. Improved internal control structures and culture emphasizing the highest level ofethical conduct havebeen implemented to ensure safe and soundpractices.

88

BANKOFZAMBIA


4 Riskmanagement policies (Continued)

(a) Overviewand riskmanagement framework (Continued)

v) Correction of deficiencies. TheBank has implemented a transparent systemof reporting controlweaknesses andfollowinguponcorrectivemeasures.

Followingbelow is thedescription anddetails of exposure to the risks identified:

Financial instrumentsbycategory

89

Financial assets

At 31 December 2018Domestic cash in handForeign currency cash and bank accountsItems in course of settlementDomestic financial assets held at FVOCILoans and advancesDomestic assets at amortised costEquity investments at FVOCIIMF funds recoverable from the Government ofthe Republic of ZambiaIMF Subscriptions

At 31 December 2017Domestic cash in handForeign currency cash and bank accountsItems in course of settlementDomestic financial assets held at FVOCILoans and advancesDomestic financial assets at amortised costEquity investments at FVOCIIMF funds recoverable from the Government ofthe Republic of ZambiaIMF Subscriptions

FVOCIK'000

4,70018,756,737

-89,543

---

--

18,850,980

2,94220,776,662

-89,543

---

--

20,869,147

AmorisedcostK'000

-----

3,994,086-

--

3,994,086

-----

2,047,827-

--

2,047,827

Loans andreceivables

K'000

--

237-

7,038,575

-

4,042,31313,748,37824,829,503

--

397-

7,903,221

-

3,367,16612,533,60223,804,386

EquityFVOCIK'000

-----

138,032

--

138,032

-----

29,950

--

29,950

Total

K'000

4,70018,756,737

23789,543

7,038,5753,994,086138,032

4,042,31313,748,37847,812,600

2,94220,776,662

39789,543

7,903,2212,047,82729,950

3,367,16612,533,60246,751,310

Financial liabilities at amortised cost

At 31 December 2018

Deposits from the Government of the Republic of ZambiaDeposits from financial institutionsForeign currency liabilities to other institutionsOther depositsOther liabilitiesDomestic currency liabilities to the IMFForeign currency liabilities to the IMFNotes and coins in circulationSDR allocation

2018K'000

1,840,7155,222,16326,68976,041

8,297,047179,839

13,748,378729,4447,779,94237,900,258

BANKOFZAMBIA



(a) Credit risk

Credit risk is the risk of financial loss to the Bank if a counterparty to a financial instrument fails to meet its obligationsand arises principally from theBank's receivables fromstaff, GRZ, commercial banks, foreign exchangedeposits andinvestment securities.

The Bank has twomajor committees that deal with credit risk. The Investment Committee deals with risk arising fromforeign currency denominated deposits while the Budget and FinanceCommittee handles risks arising from all otherassets. Thedetails of policy andguidelines arepassedon to relevant heads of departments to implement on aday-to-daybasis.

The major issues covered in the credit risk assessment include establishing criteria to determine choice of counterparties to deal with, limiting exposure to a single counter party, reviewing collectability of receivables anddeterminingappropriate credit policies.

The key principle the Bank enforces in the management of credit risk is the minimizing of default probabilities of thecounterparties and the financial loss in case of default. As such, theBank carefully considers the credit and sovereignrisk profiles in its choice of depository banks for deposit placements. Currently, the Bank's choice of depositorybanks is restricted to international banks thatmeet the set eligibility criteria of financial soundness on long-term creditrating, short-term credit rating, composite rating and capital adequacy. The current approved depository banksholding the Bank's deposits have their performance reviewed periodically, based on performance ratings providedby international rating agencies. The Bank's counterparties which, comprises mostly central banks continued tomeet theBank'sminimumaccepted credit rating criteria of A- except for theSouth AfricanReserveBank and theBankofMauritius (see table below),whichmaintainminimumbalances tomeet operational and strategic objectives.

Counterparty ratings

90

Financial liabilities

At 31 December 2017

Deposits from the Government of the Republic of ZambiaDeposits from financial institutionsForeign currency liabilities to other institutionsOther depositsOther liabilitiesDomestic currency liabilities to the IMFForeign currency liabilities to the IMFNotes and coins in circulationSDR allocation

2017K'000

3,070,5606,582,976184,423167,9027,417,862291,457

12,533,6021,365,7186,655,65438,270,154

Counterparty

Federal Reserve BankCiti Bank New YorkBank of New York Mellon (BNY)Deutsche BundesbankBank of England (BOE)South African Reserve BankBank of MauritiusWorld BankBank for International Settlement

Moody'sAaaA1Aa2AaaAa2Baa3Baa1AaaAaa

S&PAA+A+AA-AAAAABBN/AAAAAAA

FitchAAAA+AAAAAAA

BB+N/AN/AAAA

BoZ MinimumAcceptable Rating

A-A-A-A-A-A-A-A-A-

Rating agency

BANKOFZAMBIA



(a) Credit risk

Exposure to credit risk

The Bank is exposed to credit risk on all its balances with foreign banks, investments and its loans and advancesportfolios. The credit risk on balances with foreign banks and investments arise from direct exposure on account ofdeposit placements, direct issuer exposure with respect to investments including sovereigns, counterparty exposurearising from repurchase transactions, and settlement exposure on foreign exchange or securities counterpartiesbecause of timezonedifferencesor because securities transactionsare not settledonadelivery versuspayment basis.

The Bank invests its reserves in assets that are deemed to have low credit risk such as balances at other centralbanks, or balances at highly rated supranational such as the Bank for International Settlement (BIS) and othercounterpartiesmeeting theminimumaccepted ratings criteria.

Themaximum exposure to credit risk for financial assets is similar to the carrying amounts shown on the statement offinancial position.

(i) GRZbondsand TreasuryBills

Having full visibility of the Government's debt obligations and its assets the Directors are satisfied withGovernment's ability to settle outstanding obligations. Therefore, the credit risk of such instruments isclassifiedas low.

(ii) Fixed termdeposits

The directors believe that the credit risk of such instruments is also low as the policy is to rigorously reviewcounterparties and accept only those thatmeetminimumset benchmarks.BANKOFZAMBIA

Neither past due nor impaired - Institutional credit risk exposure analysis

The table below shows the credit ratings of foreign currency cash and bank accounts. The ratings were obtainedfromMoody's.

(iii) Staff loansand advances

The credit risk on staff housing loans is mitigated by security over property and mortgage protectioninsurance. The risk onother staff loans ismitigatedby security in the formof terminal benefits payments.

The Bank holds collateral against certain staff loans and advances to former and serving staff in form ofmortgage interest over property and endorsement of the Bank's interest in motor vehicle documents of title.Estimates of the fair values of the securities are based on the value of collateral assessed at the time ofborrowing, andgenerally are not updated exceptwhen a loan is individually assessedas impaired.

No formal credit ratings are available for staff loans. All loans to staff are performing loans.91

Financial Asset

Cash balancesDepositsSecuritiesSpecial drawing rights

Total

Aa1K'00037,017

---

37,017

A1K'00033,645

---

33,645

Baa1K'0003,643

---

3,643

Baa2K'000718---

718

Ratings - 2018Aaa

K'0001,278,15010,221,2954,324,9482,857,321

18,761,714

TotalK'000

1,353,17210,221,2954,324,9482,857,321

18,756,737

Financial Asset

Cash balancesDepositsSecuritiesSpecial drawing rightsTotal

Aa1K'00012,962

---

12,962

A1K'000

141,556---

141,556

Baa1K'0002,985

---

2,985

Baa2K'000249---

249

Ratings - 2017Aaa

K'0003,258,45610,665,8673,601,0093,093,57820,618,910

TotalK'000

3,416,20810,665,8673,601,0093,093,57820,776,662

BANKOFZAMBIA



(a) Credit risk (Continued)

Exposure to credit risk (Continued)

(iii) Staff loansand advances(Continued)

Anestimate of the fair valueof collateral held against financial assets is shown below:

Thepolicy for disposingof theproperties andother assets held as collateral p r o v i d e s f o r s a l e a tcompetitivemarket prices to ensure theBank suffers noor minimal loss.

All staff loans are neither past duenor impaired.

The Bank monitors concentration of credit risk by the nature of the financial assets. An analysis of theconcentrationof credit risk at the reportingdate is shownbelow:

(iv) Advances toGovernment, commercial banksandother international institutions

Government has a rating of B stable from S & P and advances to them are considered low risk. Advancesextended to commercial bankswere fullycollaterised. As at 31December 2018, all amountswere neither pastduenor impaired.

The Bank's FVOCI investment in treasury bills, held at amortised cost instruments, IMF subscriptions andother assetswheregovernment is the counterparty are all neither past due nor impaired.

(v) Collateral andother credit enhancements

TheBank employees a range of policies tomitigate credit risk. Themost commonof these are insurance andaccepting collateral for funds advanced.

Lending to commercial banks is secured over some loans extended to staff are secured against residentialproperty and motor vehicles. Amounts due from government through debt securities or bridging loans areunsecured.

The Bank's policies regarding collateral have not significantly changed during the period, neither has therebeen significant change in theoverall quality of collateral by theBank since the prior period.

92

2017K'000

89,6081,54591,153

11,50250,70319,8961,5455,0842,42391,153

Loans and advances (Note 15)

Carrying amount- Staff loans- Staff advances

Concentration by nature- House loans- Multi-purpose loans- Motor vehicle loans- Other advances- Personal loans- Other

2018K'000

96,8871,35098,237

12,24855,69920,9321,3505,1672,84198,237

2017K'000

11,50246,79519,89678,193

Loans and advances (Note 15)

Against neither past due nor impaired- Property- Gratuity and leave days- Motor vehicles

2018K'000

10,63630,94414,25355,833

BANKOFZAMBIA



(b) Credit risk (Continued)

Exposure to credit risk (Continued)

(vi) Impaired loansand investmentdebt securities

Impaired loans and securities are loans and advances and investment securities (other than those carried atfair value through profit or loss) for which the Bank determines that it is probable that it will be unable to collectall or part of principal and interest due according to the contractual terms of the loan / investment securityagreement(s).

As shown in Note 19 amounts due from closed banks of K99.7 million (2017: K105.7 million) were also fullyprovided for. No collateral was held against these assets.

(vii) Allowances for impairment

The Bank establishes a specific allowance for impairment losses on assets carried at amortised cost orclassified as FVOCI that represents its estimate of incurred losses in its loan and investment security portfolio.The only component of this allowance is a specific loss component that relates to individually significantexposures.

Concentrationof risksof financial assetswithcredit risk exposure

Foreign currency cash and bank accountsItems in course of settlementDomestic financial assets at FVOCILoans and advancesDomestic financial assets at amortised costEquity investments at FVOCIIMF funds recoverable from Government of the

Republic of ZambiaIMF subscriptions

Foreign currency cash and bank accountsItems in course of settlementDomestic financial assets at FVOCILoans and advancesDomestic financial assets at amortised costEquity investments at FVOCIIMF funds recoverable from Government of the

Republic of ZambiaIMF subscriptions

FinancialInstitutions

K'000

18,756,737237

89,54328,104

-138,032

-13,748,37832,761,031

FinancialInstitutions

K'00020,776,662

39789,543115,830

-27,950

-12,533,602

33,543,984

IndividualsK'000

98,238

-98,238

IndividualsK'000

---

91,153--

--

91,153

GovernmentK'000

6,912,2333,994,085

4,042,313-

14,948,631

GovernmentK'000

---

7,696,2382,047,827

-

3,367,166-

13,111,231

OthersK'000

--

OthersK'000

------

--

-

TotalK'000

18,756,737237

89,5437,038,5753,994,085138,032

4,042,31313,748,37847,812,600

TotalK'000

20,776,662397

89,5437,903,2212,047,82727,950

3,367,16612,533,602

46,746,368

93

31 December 2018

31 December 2017

BANKOFZAMBIA



(b) Liquidity risk

This is the risk of being unable to meet financial commitments or payments at the correct time, place and in therequired currency. TheBankas a central bankdoes not face ZambianKwacha liquidity risks.

In the context of foreign reserves management, the Bank's investment strategy ensures the portfolio of foreignreserves is sufficiently liquid to meet external debt financing, GRZ imports and interventions in the foreign exchangemarket when need arises. TheBankmaintains a portfolio of highlymarketable foreign currency assets that can easilybe liquidated in the event of unforeseen interruption or unusual demand for cash flows.

The following table provides an analysis of the financial assets held for managing liquidity risk and liabilities of theBank into relevantmaturity groupsbasedon the remainingperiod to repayment from31December 2018.

Financial assets and liabilitiesheld formanaging liquidity risk

94

31 December 2018

Non-derivative liabilitiesDeposits from the GRZDeposits from financial institutionsForeign currency liabilities to other

institutionsOther depositsNotes and coins in circulationOther liabilitiesDomestic currency liabilities to IMFForeign currency liabilities to IMFSDR allocation

Total non-derivative liabilities

Assets held for managing liquidity riskDomestic cash in handForeign currency cash and bank accountsFinancial assets held at FVOCIFinancial assets held at amortised costLoans and advancesIMF funds recoverable from theGovernment of the Republic of ZambiaIMF Subscription

Total assets held for managing liquidity risk

Net exposure

Ondemand

K'000

1,840,7155,222,163

26,68976,041

8,297,047

13,748,377729,444

-

29,940,476

4,70016,667,617

--

126,342

4,042,31313,748,378

34,589,350

(4,648,874)

Duebetween

3 - 12monthsK'000

--

---

179,839---

179,839

-2,084,490

---

--

2,084,490

(1,929,571)

Due within3 months

K'000

--

-------

-

-4,63189,543

-6,912,233

--

7,006,407

(7,006,407)

Duebetween

1 – 5 yearsK'000

--

-------

-

---

3,994,085-

--

3,994,085

(3,994,085)

Dueafter 5yearsK'000

--

-------

-

-----

--

-

-

TotalK'000

1,840,7155,222,163

26,68976,041

8,297,047179,839

13,748,377729,444

-

30,120,315

4,70018,756,737

89,5433,994,0857,038,575

4,042,31313,748,378

47,674,331

(17,554,016)

BANKOFZAMBIA



(b) Liquidity risk

Assets held formanaging liquidity risk

The Bank holds a diversified portfolio of cash and high-quality highly-liquid balances to support payment obligationsand contingent funding in a stressed market environment. The Bank's assets held for managing liquidity riskcomprise:

! GRZ bonds and other securities that are readily acceptable in repurchase agreements with commercial banks;and

! Cashand foreign currency balanceswith central banks andother foreign counterparties;

Sources of liquidity are regularly reviewed by the Investment Committee to maintain a wide diversification bycurrency, geography, provider, product and term.

(c) Market risk

Market risk is the risk that changes in market prices, such as interest rate, equity prices and foreign exchange ratesandcredit spreadswill affect theBank's incomeor the valueof its holding of financial instruments.

The Bank sets its strategy and tactics on the level of market risk that is acceptable and how it would be managedthrough the Investment Committee. The major thrust of the strategy has been to achieve a sufficiently diversifiedportfolio of foreign currency investments to reduce currency risk and induceadequate returns.

95

31 December 2017

Non-derivative liabilitiesDeposits from the GRZDeposits from financial institutionsForeign currency liabilities to other

institutionsOther depositsNotes and coins in circulationOther liabilitiesDomestic currency liabilities to IMFForeign currency liabilities to IMFSDR allocation

Total non-derivative liabilities

Assets held for managing liquidity riskDomestic cash in handForeign currency cash and bank accountsFinancial assets at FVOCIFinancial assets at amortised costLoans and advancesIMF funds recoverable from the

Government of the Republic of ZambiaIMF Subscription

Total assets held for managing liquidity risk

Net exposure

Ondemand

K'000

3,070,5606,582,976

184,423167,9027,417,862

12,533,6021,365,718

-

31,323,043

2,94216,897,626

--

251,018

3,367,16612,533,602

33,052,355

(1,729,312)

Duebetween

3 - 12monthsK'000

--

---

291,457---

291,457

-874,133

---

--

3,874,133

(3,582,676)

Duewithin

3 monthsK'000

--

-------

-

-4,90289,543

-7,652,203

--

7,746,648

7,746,648

Duebetween

1 – 5 yearsK'000

--

-------

-

---

2,047,827-

--

2,047,827

2,047,827)

Dueafter 5yearsK'000

--

-------

-

-----

--

-

-

TotalK'000

3,070,5606,582,976

184,423167,9027,417,862291,457

12,533,6021,365,718

-

31,614,500

2,94220,776,662

89,5432,047,8277,903,221

3,367,16612,533,602

46,720,964

(15,106,464)

BANKOFZAMBIA



(d) Exposure to currency risk

Currency risk is the risk of adverse movements in exchange rates that will result in a decrease in the value of foreignexchangeassets or an increase in the value of foreign currency liabilities.

The Bank's liabilities are predominately held in Kwacha, while the foreign currency assets have been increasing,resulting in large exposure to foreign exchange risk. This position coupled with substantial exchange ratefluctuations is primarily responsible for the Bank recording large realised and unrealised exchange gains/ (losses)over the years. The Bank is exposed to foreign exchange risk arising from various currency exposures primarily withrespect to the US Dollar, British Pound and Euro. The Investment Committee is responsible for making investmentdecisions that ensuremaximumutilisationof foreign reserves atminimal risk.

The Bank as a central bank by nature holds a net asset position in its foreign currency balances. The Directors havemandated the Investment Committee to employ appropriate strategies and methods to minimise the eminentcurrency risk. Notable among useful tools used by the Investment Committee is the currencymix benchmark, whichensures that the foreign currency assets that are held correspond to currencies that are frequently used forsettlement of GRZ and other foreign denominated obligations. All benchmarks set by the Committee are reviewedregularly to ensure that they remain relevant.

TheBank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financialposition and cash flows and the net exposure expressed in Kwacha as at 31 December 2018 was as shown in thetable below:

96

At 31 December 2018Foreign currency assetsForeign currency cash and bank accountsIMF Subscriptions

Total foreign currency assets

Foreign currency liabilities

Foreign currency liabilities to otherinstitutions

Foreign currency liabilities to IMFSDR allocation

Total foreign currency liabilities

Net exposure

At 31 December 2017

Foreign currency assetsForeign currency cash and bank accountsIMF Subscriptions

Total foreign currency assets

Foreign currency liabilities

Foreign currency liabilities to otherinstitutions

Foreign currency liabilities to IMFSDR allocation

Total foreign currency liabilities

Net exposure

USDK'000

13,207,652-

13,207,652

23,272--

23,272

13,184,380

USDK'000

15,256,136-

15,256,136

145,526--

145,526

15,110,610

EURK'000313-

313

1,390--

1,390

(1,077)

EURK'000

1,586-

1,586

---

-

1,586

GBPK'000

877,400-

877,400

2,026--

2,026

875,374

GBPK'000

792,293-

792,293

38,897--

38,897

753,396

SDRK'000

2,857,32213,748,378

16,605,700

-729,4447,779,942

8,509,386

8,096,314

SDRK'000

3,093,57812,533,602

15,627,180

-1,365,7186,655,654

8,021,372

7,605,808

OtherK'000

1,814,049-

1,814,049

---

-

1,814,049

OtherK'000

1,633,069-

1,633,069

---

-

1,633,069

TotalKwacha

18,756,73613,748,378

32,505,114

26,689729,4447,779,942

8,536,075

23,969,039

TotalKwacha

20,776,66212,533,602

33,310,264

184,4231,365,7186,655,654

8,205,795

25,104,469

BANKOFZAMBIA



(d) Exposure to currency risk (Continued)

The following are exchange rates for the significant currencies applied as at the endof the reporting period:

Foreigncurrencysensitivity

The following table illustrates the impact of a 12% (2017: 12%) strengthening of the Kwacha against the relevantforeign currencies. 12% is based on long-term observable trends, presented to key management personnel, in thevalue of Kwacha to major foreign currencies. The sensitivity analysis includes only foreign currency denominatedmonetary items outstanding at reporting date and adjusts their translation for a 12%change in foreign currency rates.This analysis assumesall other variables; in particular interest rates remain constant.

Effect in thousands of Kwacha

A 12 % weakening of the Kwacha against the above currencies at 31 December would have had an equal butopposite effect to the amounts shown above.

(e) Exposure to interest rate risk

Interest rate risk is the risk that the fair value of a financial instrument or the future cash flows will fluctuate due tochanges inmarket interest rates.

TheBank takes on exposure to the effects of fluctuations in the prevailing levels ofmarket interest rates on its financialposition and cash flows. Interest marginsmay increase as a result of such changes but may reduce or create lossesin the event that unexpectedmovements arise. The Board of Directors approves levels of borrowing and lending thatare appropriate for theBank tomeet its objective ofmaintainingprice stability at reasonable cost.

Foreign currency balances are subject to floating interest rates. Interest rate changes threaten levels of income andexpected cash flows. The Bank holds a net asset position of foreign exchange reserves and interest income faroutweighs interest chargesondomestic borrowing and staff savings.

Substantial liabilities including currency in circulation and balances for commercial banks andGRZministries attractno interest.

97

2017K'000

14.1913.4211.929.99

SDR 1GBP 1EUR 1USD 1

2018K'000

16.5815.1413.6611.92

Spot rate

Profit or (loss)K'000

(971,558)(1,581,655)

(129)(105,045)

(912,697)(1,813,273)

(190)(90,408)

31 December 2018

SDRUSDEURGBP

31 December 2017

SDRUSDEURGBP

EquityK'000

(971,558)(1,582,126)

(129)(105,045)

(912,697)(1,813,273)

(190)(90,408)

BANKOFZAMBIA



(e) Exposure to interest rate risk (Continued)

Foreign currency deposits are the major source of interest rate risk for the Bank. The Directors have establishedinformation systems that assist in monitoring changes in the interest variables and other related information toensure the Bank is in a better position to respond or take proactive action tomeet challenges or opportunities as theyarise. The Directors have also set performance benchmarks for income arising from balances with foreign banks,that are evaluated monthly through the Budget and Finance Committee, Investment Committee and the ExecutiveCommittee. TheBoard reviews theperformance against budget onaquarterly basis.

Whilst adhering to the key objectives of capital preservation and liquidity, theBank continued to posture itself towardsimplementing return enhancing strategies which has seen a careful management of the distribution of reserves interms of liquidity, invested and working capital tranches to obtain optimum balance that enhances returns whileassuring security.

The table below shows the extent to which the Bank's interest rate exposures on assets and liabilities are matched.Items are allocated to time bands by reference to the earlier of the next contractual interest rate repricing date ormaturity date. This effectively showswhen the interest rate earnedor chargedon assets and liabilities are expected tochange. The table can therefore be used as the basis for an assessment of the sensitivity of the Bank's net income tointerest rate movements. Due to the short-term nature of most of the financial assets the Bank retains flexibility inshifting investment horizons resulting in reduced impact on interest rate changeson theBank financial performance.

98

At 31 December 2018

AssetsDomestic cash in handForeign currency cash and bank accountsItems in course of settlementLoans and advancesDomestic financial assets at FVOCIDomestic financial assets at amortised costEquity investments at FVOCIOther assetsIMF funds receivable from GovernmentIMF Subscriptions

Total financial assets

LiabilitiesDeposits from the GRZDeposits from financial institutionsForeign currency liabilities to other institutionsOther depositsNotes and coins in circulationOther liabilitiesDomestic currency liabilities to IMFForeign currency liabilities to IMFSDR allocation

Total financial liabilities

Net exposure at 31 December 2018

Less than 3monthsK'000

-18,752,107

-----

--

18,752,107

---

76,041-----

76,041

18,828,148

Over1 yearK'000

---

6,940,33789,543

3,994,085134,482

--

11,158,447

---------

-

11,065,904

Between 3months and

one yearK'000

---

96,887-----

96,887

---------

-

96,887

Non-interestbearingK'000

4,7004,6312371,350

--

3,55062,903

4,042,31313,748,377

17,868,061

1,840,7155,222,16326,689

-8,297,047179,839

13,748,378729,444

-

30,044,275

(12,176,214)

TotalK'000

4,70018,756,737

2377,038,57589,543

3,994,085138,03262,903

4,042,31313,748,377

47,875,502

1,840,7155,222,16326,68976,041

8,297,047179,839

13,742,378729,444

-

30,120,316

17,753,186

BANKOFZAMBIA



(e) Exposure to interest rate risk (Continued)

(f) Fair values

The table below sets out fair values of financial assets and liabilities, together with their carrying amounts as shown inthe statement of financial position. The Directors believe that the carrying amounts of the Bank's financial assets andliabilities provide a reasonable estimate of fair value due to their nature. The financial assets are subject to regularvaluationswhile the liabilities are short term in nature, often repayable ondemand.

99

At 31 December 2017

AssetsDomestic cash in handForeign currency cash and bank accountsItems in course of settlementLoans and advancesDomestic financial assets at FVOCIDomestic financial assets at amortised costEquity investments at FVOCIIMF funds receivable from GovernmentIMF Subscriptions




Net exposure at 31 December 2017

Less than 3monthsK'000

-20,771,760

-------

20,771,760

---

167,902-----

167,902

20,603,858

Over 1 yearK'000

---

7,812,06889,543

2,047,82726,400

--

9,975,838

---------

-

9,975,838

Between 3months and

one yearK'000

---

89,608-----

89,608

---------

-

89,608

Non-interestbearingK'000

2,9424,9023971,545

--

3,5503,367,16612,533,602

15,914,104

3,070,5606,582,976184,423

-7,417,862291,457

12,533,6021,365,718

-

31,446,598

(15,532,494)

TotalK'000

2,94220,776,662

3977,903,22189,543

2,047,82729,950

3,367,16612,533,602

46,751,310

3,070,5606,582,976184,423167,9027,417,862291,457

12,533,6021,365,718

-

31,614,500

15,136,810

BANKOFZAMBIA



(f) Fair values (Continued)

Fair value hierarchy

IFRS13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques areobservable or unobservable. Observable inputs reflect market data obtained from independent sources;unobservable inputs reflect the bank market assumptions. These two types of inputs have created the following fairvalue hierarchy:

Level 1 –Quotedprices (unadjusted) in activemarkets for identical assets or liabilities. This level includes listed equitysecurities and debt instruments on exchanges (for example, Lusaka Stock Exchange) and exchanges tradedderivatives like futures (for example,NASDAQ,S&P500).

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, eitherdirectly (that is, as prices) or indirectly (that is, derived from prices). This level includes the swaps and forwards. Thesourcesof input parameters like LIBORyield curve or counterparty credit risk areBloomberg andReuters.

Level 3 – inputs for the asset or liability that are not based onobservablemarket data (unobservable inputs). This levelincludes equity investments anddebt instrumentswith significant unobservable components.

This hierarchy requires the use of observable market data when available. The Bank considers relevant andobservablemarket prices in its valuationswherepossible.

100

AssetsDomestic cash in handForeign currency cash and bank accountsItems in course of settlementDomestic financial assets at FVOCILoans and advancesDomestic financial assets at amortised costEquity investments at FVOCIIMF funds receivable from GRZIMF Subscriptions




Carryingamount

2018K'000

4,70018,756,737

23789,543

7,038,5753,994,085138,0324,042,31313,748,378

47,812,600

1,840,7155,222,16326,68976,041

8,297,047179,839

13,748,378729,4447,779,942

37,900,258

CarryingAmount

2017K'000

2,94220,776,662

39789,543

7,903,2212,047,82729,950

3,367,16612,533,602

46,751,310

3,070,5606,582,976184,423167,9027,417,862291,457

12,533,6021,365,7186,655,654

38,270,154

Fairvalue2018K'000

4,70018,756,737

23789,543

7,038,5753,994,085138,0324,042,31313,748,378

47,812,600

1,840,7155,222,16326,68976,041

8,297,047179,839

13,748,378729,4447,779,942

37,900,258

Fairvalue2017K'000

294220,776,662

39789,543

7,903,2212,047,82729,950

3,367,16612,533,602

46,751,310

3,070,5606,582,976184,423167,9027,417,862291,457

12,533,6021,365,7186,655,654

38,270,154

BANKOFZAMBIA



(f) Fair values (Continued)

At 31December 2018, theBankdid not have financial liabilitiesmeasured at fair value (2017: nil).

(g) Managementof capital

The Bank's authorised capital is set and maintained in accordance with the provisions of the Bank of Zambia Act 43,1996. The Act provides a framework, which enables sufficient safeguards to preserve the capital of the Bank fromimpairment (Sections 6, 7 and 8 of the Bank of Zambia Act 43, 1996). The Government of the Republic of Zambia isthe sole subscriber to the paid up capital of the Bank and its holding is not transferable in whole or in part nor is itsubject to any encumbrance.

The scope of the Bank's capital management framework covers the Bank's total equity reported in its financialstatements. The major drivers of the total equity are the reported financial results and profit distribution policiesdescribedbelow.

The Bank's primary capital management objective is to have sufficient capital to carry out its statutory responsibilitieseffectively. Therefore, inmanaging the Bank's capital the Board's policy is to implement a sound financial strategy thatensures financial independence and maintains adequate capital to sustain the long-term objectives of the Bank andtomeet its operational andcapital budgetwithout recourse to external funding.

Distributable profits as described in the provisions of Sections 7 and 8 of theBank of ZambiaAct 43, 1996 are inclusiveof unrealised gains. The Board is of the opinion that the distribution of unrealised gains would compromise the Bank'scapital adequacy especially that such gains are not backed by cash but aremerely book gains thatmay reversewithinno time. The Bank has made proposals under the proposed amendments to the Bank of Zambia Act to restrictdistributable profits to those that are realised.

Therewere nochanges recorded in theBank's strategy for capitalmanagement during the year.

TheBank's capital position as at 31Decemberwas as follows:

The capital structure of the Bank does not include debt. As detailed above the Bank's equity comprises issued capital,general reserves, property revaluation reserve and the retained earnings. The Bank's management committeeperiodically reviews the capital structure of theBank to ensure theBankmaintains its ability tomeet its objectives.

101

31 December 2018

Financial assets at FVOCIEquity investment at FVOCI

31 December 2017

Financial assets at FVOCIEquity investment at FVOCI

Level 1

---

Level 1

---

Level 3

---

Level 3

-29,95029,950

Level 2

89,543138,032227,575

Level 2

89,543-

89,543

Total

89,543138,032227,575

Total

89,54329,950119,493

2017K'000

500,0205,586,1421,798,905230,5078,115,574

Notes

37383838

CapitalRetained earningsGeneral reserve fundProperty revaluation reserveTotal

2018K'000

500,0207,887,3201,929,377354,584

10,541,452

BANKOFZAMBIA


5 Interest income

There was a decline in the interest on loans and receivables due to the change in interest application on the Kwacha BridgeLoan to the Government from an average rate of 24.9 % at the time when the advance was obtained to a floating rate ofpreviousmonth's inflationplus 2%.

The reduction in the interest arising on open market operations was on account of lower open market operations activityduring the period.

No interest is paid ondeposits fromfinancial institutions, theGRZand foreign currency liabilities to other institutions.

6 Fee and commission income

7. Other gainsand losses

The rise in net unrealised gains/(losses) recorded during 2018, was account of the depreciation of the Kwacha against majorforeign currencies during the year. The Kwacha depreciated by about 20% from K9.91 per US dollars as at 31st December2017 to close at K11.92 on 31st December 2018. The increase in other income is because of reversal of provisions againstlegal cases followingdisposal of court proceedings.

102

2017K'000

1,283,752267,695201,716

1,753,163

2017K000

112,5724,027

116,599

2017K00096,69493,1929,5052,6651,172

203,228

3,828

2017K'000

494,97020,2912,5631,7071,051

(326,820)

193,762

Interest on loans and receivablesInterest Government securitiesInterest on foreign currency investments and deposits

Total interest income

Interest expense

Interest arising on open market operationsInterest arising on staff savings

Total interest expense

Fees and commission income on transactions with the GRZSupervision feesLicences and registration feesPenaltiesOther

Fees and commission income

Fee and commission expense

Arising on foreign exchange transactions

Net realised foreign exchange gainsOther incomeDividend on equity investments at FVOCIRental incomeGain on disposal of property, plant and equipmentNet unrealised foreign exchange gains/(losses)

2018K'000

443,620337,952285,469

1,067,041

2018K'00029,5034,842

34,345

2018K'00084,323102,4141,1404,25011,468

203,595

5,089

2018K'000

626,088796,566

12,360115

1,298,749

2,723,879

BANKOFZAMBIA


8. Impairment of financial assets

9 Employee benefits

10 Operatingexpenses

11 Income tax

TheBank is exempt from income tax under section 56of theBankof ZambiaAct, No. 43of 1996.

12 Foreigncurrencycashandbank accounts

103

At 1 January 2017Impairment loss for the year- Reversal during the year

Balance at 31 December 2017

At 1 January 2018Changes on initial application of IFRS 9Restated balance at 1 January 2018Impairment loss for the year- Reversal during the year

Balance at 31 December 2018

Amounts duefrom closed

banks(Note 19)

K'000124,158

(18,441)

105,717

105,717-

105,717

(6,048)

99,669

Loans andadvances(Note 15)

K'00023,525

(23,525)

-

---

-

-

Other assets(Note 18)

K'000910

-

910

9101,0281,938

(214)

1,724

TotalK'000

148,593

(41,966)

106,627

106,6271,028

107,655

(6,262)

101,393

2017K'000

205,818183,07716,7825,589(2,559)

408,707

Wages and salariesOther employee costsEmployer's pension contributionsEmployer's NAPSA contributionsStaff loan benefit (Note 15)

2018K'000

224,121213,2066,94215,627(3,166)

456,730

2017K'000

10,664,7783,871,1473,142,2573,093,578

4,902

20,776,662

Deposits with non-resident banksCurrent account balances with non-resident banksClearing correspondent accounts with other central banksSpecial Drawing Rights (“SDRs”)Foreign currency cash with banking office

2018K'000

10,031,5572,080,8463,782,3822,857,321

4,631

18,756,737

312,51221,92721,370

2

355,811

Administrative expensesExpenses for bank note productionRepairs and maintenanceSundry banking office expenses

130,55890,84019,658

17

241,073

BANKOFZAMBIA


13 Items incourse of settlement

Items in the course of settlement represent claims on credit institutions in respect of cheques lodged with the Bank by itscustomers on the last business day of the year and presented to the Bank on or after the first business day following thefinancial year-end.

14. Domestic financial assets at Fair Value throughotherComprehensive Income (FVOCI)

Balances represent actual holdings of TreasuryBills acquiredby theBank through rediscounts by commercial banks.

15 Loansand advances

Loans and advances to staff were made at concessionary rates. Credit quality is enhanced by insurance and collateraldemanded.Collateral will generally be in the formof property or retirement benefits.

Where staff loans are issued to members of staff at concessionary rates, fair value is calculated based on market rates. Thiswill result in the long-termstaff loansbenefit as shownabove.

Themaximumprevailing interest rates on staff loanswere as follows

a) RecapitalisationbondThe capitalisation bond of K221.2 million at 31st December 2017 represented a series of equity bonds authorised by theGRZ for thepurpose of financing theoutstanding calledup capital of theBank. Details are as illustratedbelow:

104

2017K'00079,43410,174

89,6087,474,994221,244115,8301,545

7,903,221

Staff loansStaff loans benefit at market value

Total staff loansBudgetary advances to the GovernmentCapitalisation bondCredit to banksStaff advances

Total loans and advances

2018K'00087,8449,044

96,8886,912,233

-28,1041,350

7,038,575

2017K'00012,733(5,118)7,6152,55910,174

a) Staff loansMovement in staff loans benefit

Balance at 1 JanuaryCurrent year fair value adjustment of new loans

Amortised to statement of comprehensive income (Note 9)Balance at 31 December

2018K'00010,174(4,296)5,8783,1669,044

2017K'000

10%10%12.5%

House loansPersonal loansMulti-purpose loans

2018K'000

10%10%12.5%

BANKOFZAMBIA


15 Loansand advances (Continued)

b) Recapitalisationbond (Continued)

As a way of financing the outstanding called up capital of K490.0 million in Bank of Zambia, GRZ agreed to issue aseries of bonds in accordancewith termsand conditions as statedbelow:

The series of bonds were designated as “GRZ Equity injection bonds, Series 2013A”, and were authorised by thePublic Finance Act in the aggregate sum of K490.0 million for the purpose of financing the outstanding called upauthorised capital of theBankand for paying costs related to the issuanceof theSeries 2013Abonds.

In January 2015, the 2013A bonds dates of delivery were revised by the issuer as per table below with a resultingimpact of a fair value adjustment of K50.9million.

The first instalment was paid on 16 January 2015 while the second was settled on 31 January 2017. The remaining two weresettledduring the year bywayof application of part of the dividendpaid togovernment.

The termsof the bondswere:

(a) The2013Abonds shall not bear any interest.

(b) The2013Abonds shall be non-transferable

(c) The2013Abonds shall be issuable in suchdenominations as theBankdeems appropriate.

(d) The principal amount on the 2013A bonds shall be payable through the accounts established at the Bank for thepurposesof thebond indenture.

16 Domestic financial assets at amortisedcost

17 TheGRZconsolidated securities

105

2017K'000

260,000(52,953)207,04714,197221,244

Total Capitalisation bondAmortised cost adjustment

Unwinding of fair value adjustmentCapitalisation bond after adjustments

2018K'000

-----

Order 2013A serial bonds2015201620172018

Principal amount due100,000130,000130,000130,000

Old maturity date30 June 201430 June 201530 June 201630 June 2017

New maturity date16 January 201531 January 201730 June 201830 June 2019

2017K'000

1,791,618215,52740,682

2,047,827

GRZ consolidated securities (Note 17)Other GRZ securitiesStaff savings treasury bills

2018K'000

1,762,9542,194,39236,739

3,994,085

2017K'000

1,154,597637,021

1,791,618

6% GRZ consolidated bond364 days Treasury Bills

2018K'000

1,120,968641,987

1,762,955

BANKOFZAMBIA


17 TheGRZconsolidated securities (Continued)

Effective 1 December 2007 a portion of the consolidated bond was converted to Treasury Bills, thereby creating a portfolio ofmarketable securities, for the purpose of enhancing the range of instruments available for implementingmonetary policy andto support theBank's strategic objective ofmaintaining price stability.

The consolidated bondwas issued on 27 February 2003 following an agreement signedwith GRZ to consolidate all the debtsowed by GRZ to the Bank. In consideration of such consolidation of debt, GRZ undertook and agreed to issue, effective 1January 2003, in favour of the Bank a 10-year long-term bond with a face value of K1,646.74million and a coupon rate of 6%.This reduced toK1,120.97million after the 2007 conversion.

Both themarketable securities and the reduced portion of the 10 year consolidated bond were rolled over on 2 January 2013for an additional period of 10 years. In accordancewith the conversion agreement between theGRZ andBank of Zambia, themarketable securities were to be rolled over uponmaturity at yield rates prevailing in themarket on the dates of rollover, whiletheK1,120.97millionwould be rolled over for another 10 years at a coupon rate of 6%.

The bond is carried at amortised cost at an original effective interest rate of 6.04%. The bond is reviewed on an annual basisfor any impairment.

The Treasury Bills are measured at amortised cost at an effective interest rate of 12.58%. The Treasury Bills are renewable inthe short term and the rolled over values will reflect fair values. However, where objective evidence of impairment exists, ameasurement of the impairment losswill bedetermined and recorded in profit or loss.

18. Other assets

Office stationery and other consumables represent bulk purchases and are held for consumption over more than onefinancial year.

20 Equity investmentsat FVOCI

The Bank designates equity investments at FVOCI when those investments are held for purposes other than to generateinvestment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequentlyreclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reportedseparately from other changes in fair value. Dividends, when representing a return on such investments, continue to berecognised in profit or loss as other income when the Bank's right to receive payment is established. Dividends that areconverted to shares are recorded inOCI.

106

2017K'00010,2696,0342,49018,793(910)17,883

PrepaymentsSundry receivablesStationery and office consumables

Specific allowances for impairment (Note 8)

2018K'00055,0625,9023,66464,628(1,724)62,904

2017K'000

105,717(105,717)

-

AdvancesSpecific allowances for impairment (Note 8)

2018K'00099,669(99,669)

-

3,55026,400

29,950

Zambia Electronic Clearing House LimitedAfrican Export Import Bank

3,550134,482

138,032

BANKOFZAMBIA


20 Equity investmentsat FVOCI (Continued)

Zambia ElectronicClearingHouse Limited

The investment in Zambia Electronic Clearing House Limited (“ZECHL”) represents the Bank's contribution of K3.550 million,for the establishment of the National Switch to enhance ZECHL functionality, more specifically to support electronic point ofsale transactions to help minimise cash based transactions and their attendant costs and risks. The principal activity ofZECHL is the electronic clearing of cheques and direct debits and credits in Zambia for its member banks, including the Bankof Zambia. The ZECHL is fundedby contributions frommember banks. ZECHL is considered an equity investment at FVOCI.As there is no reliablemeasure of the fair value of this investment, it is carried at cost, and regularly reviewed for impairment ateach reporting date. ZECHL has a unique feature of being set up as a non-profit making concern whosemembers contributemonthly to its operating expenses andother additional requirements. Other contributionsmadeby theBankduring the year ofK0.111million (2017: K0.032million) are included in administrative expenses.

AfricaExport ImportBank

The Bank of Zambia holds an investment in the equity of Africa Export Import Bank. (“AEIB”). AEIB is a grouping of regionalcentral banks and financial institutions designed to facilitate intra and extra African trade. AEIB is a financial instrumentclassifiedas anequity investment at FVOCI.

The investment in AEIB includes dividend equivalent to K3.156million received in 2018, which was converted into equity. Thiswas in linewith AEIB's call for equity increase to strengthen its capital and enable improvedpursuanceof itsmandate.

21 IMF funds recoverable fromtheGovernmentof theRepublic of Zambia

This represents fundsdrawnby theGovernment of theRepublic of Zambia against the IMFPRGF facility (Note 34).

Loans under the PRGF carry an interest rate of 0.5 percent, with repayments semi-annually, beginning five-and-a-half yearsanda finalmaturity of 10 years after disbursement.

The Extended Credit Facility (ECF) succeeded the PRGF effective 7th January 2010 as the Fund's main tool for providingsupport to Low Income Countries (LICs). Financing under the ECF carries a zero interest rate through 2013, with a graceperiodof 5½years, anda finalmaturity of 10 years.

22 IMFsubscriptions

The IMF subscription represents membership quota amounting to SDR 489,100,000 (2017: SDR 489,100,000) assigned tothe GRZ by the IMF and forms the basis for the GRZ's financial and organisational relationship with the IMF. The financialliability relating to the IMF subscription is reflected under Note 34. The realisation of the asset will result in simultaneoussettlement of the liability. The IMFQuota subscription and the related liability have the samevalue.

Themovement on IMF subscription is on account of currency valuation adjustments between 2018 and2017. The valuation isconductedonce every 30April of the year by the IMFandadvised tomember countries to effect the necessary adjustments.

107

2017K'000

3,346,41320,753

3,367,166

Poverty Reduction and Growth Facility (PRGF)*Accrued charges - SDR Allocation

2018K'000

3,952,95089,363

4,042,313* Formerly Enhanced Structural Adjustment Facility (ESAF) obligation.

BANKOFZAMBIA


23. Property, plant and equipment

(a) The fair value measurement of the leasehold buildings as at 31 December 2018 were performed by Messrs R.M.Fumbeshi & Co Limited, independent valuers. Messrs R.M. Fumbeshi & Co Limited are members of the RoyalInstitute of Chartered Surveyors, and they have appropriate qualifications and recent experience in the fair valuemeasurement of properties in the relevant locations.

The fair value of business buildings was determined using the depreciated replacement cost approach that reflectsthe cost to a market participant to construct assets of comparable utility and age, adjusted for obsolescence. Otherbuildings' fair values were based on the market comparable approach that reflects recent transaction prices forsimilar properties. The valuation techniques are consistent with those applied in the past. The carrying amount of therevaluedproperties if carried under costmodelwould beZMW17.1million (2017: ZMW14.7million)

(b) Capital work-in-progress represents the expenditure to date onoffice refurbishment and software upgradeprojects.

108

Cost or valuation

At 1 January 2017AdditionsTransfersDisposals31 December 2017AdditionsTransfersRevaluationDisposals31 December 2018

Accumulated depreciationAt 1 January 2017Charge for the yearDisposalsAt 31 December 2017Charge for the yearTransfer to ReservesDisposalsAt 31 December 2018

Carrying amounts

At 31 December 2018

At 31 December 2017

Leaseholdbuildings

K'000

272,058-

11,567(319)

283,306-

2,842102,148

-388,294

16,6035,519

-22,1225,668

(27,701)-90

388,205

261,184

Motorvehicles,bulliontruck

and escortvehicles

K'000

42,1876,5342,370(3,336)47,755

---

(97)47,658

27,6294,787(2,825)29,5915,582

-(97)

35,179

12,479

18,164

Furniture,Fittings,

computers,plant,

machineryand

equipmentK'000

215,53711,5185,049(4,922)227,1827,5927,578

-(3,952)238,398

99,30519,810(4,756)114,35919,345

-(3,944)129,654

108,744

112,823

Capitalwork-in

progressK'000

58,63020,312(19,879)

-59,06352,801(11,094)

--

99,961

-

------

99,961

59,063

TotalK'000

588,41238,364(893)(8,577)617,30660,393(674)

102,148(4,049)775,123

143,53730,116(7,581)166,07330,595(27,701)(4,041)164,922

610,199

451,234

BANKOFZAMBIA


24 Intangible assets

25 Capital expenditure commitments

The funds tomeet the capital expenditure commitmentswill be sourced from internally generated funds.

26 Deposits fromtheGovernmentof theRepublic of Zambia

Thedeposits are non-interest bearing, are payable ondemandandaredue to theMinistry of Finance andNational Planning.

27. Deposits fromfinancial institutions

The deposits except for term deposits are non-interest bearing and are payable on demand. Term deposits from financialinstitutions arise from open market operations (OMO). These are short-term instruments with maximum maturity of up to 90days and are used as ameans of implementingmonetary policy. The instruments bear interest at rates fixed in advance forperiodsup tomaturity. No collateral was providedagainst anydeposits at 31December 2018.

28 Foreigncurrency liabilities toother institutions

These are deposits by foreign governments and institutions, are non-interest bearing and are repayable on demand.Balances at endof year relatemainly to fundsprovidedby foreign institutions in respect of project support. 109

CostAt 1 January 2017DisposalsAdditionsAt 1 January 2018AdditionsTransfer from work-in-progress (Note 23)

At 31 December 2018

Amortisation and impairmentAt 1 January 2017Amortisation charge for the yearAt 1 January 2018Amortisation charge for the yearAt 31 December 2018Carrying amounts

At 31 December 2018

At 31 December 2017

Purchased SoftwareK'000

52,741-

89353,634

-674

54,308

47,4114,52651,937205

52,142

2,166

1,697

2017K'000

118,111Authorised by the directors and contracted for

2018K'000

69,483

2017K'000

4,809,5831,372,020400,978

36134

6,582,976

Statutory minimum reserve requirementsCommercial bank current accountsTerm deposits from financial institutionsDeposits from other international financial institutionsDeposits from other central banks

2018K'000

3,774,1281,433,410

1,14213,449

34

5,222,163

BANKOFZAMBIA


28 Foreigncurrency liabilities toother institutions (Continued)

29 Other deposits

Staff savings bear floating-interest rates compounded on a daily basis and paid at the end of the month. They are repayableondemand.

30 Notes and coins incirculation

31 Other liabilities

Other liabilities are expected tobe settled nomore than 12months after the endof the reportingperiod.

32 Provisions

The provisions are in respect of various claims brought against the Bank in the courts of law on which it is probable that afinancial outflowwill be required to settle the claims.

110

2017K'000

167,902Staff savings, deposits and clearing accounts

2018K'000

76,041

2017K'000

184,423Donor funds

2018K'000

26,689

2017K'000

5,067,8261,542,082292,698114,70989,10028,172102,2977,236,884180,9787,417,862

Bank notes issued by denominationK100K50K2010K5K2Unrebased notesBank notes issuedCoins issued

2018K'000

5,266,7792,159,563281,914108,726120,83649,172102,2978,089,287207,7608,297,047

151,942139,515

291,457

Accounts payableAccrued expenses payable

64,020115,819

179,839

2017K'000

666,425177,063(7,155)

836,333

Balance at 1 JanuaryProvisions made during the yearPayments and reversals made during the year

Balance at 31 December

2018K'000

836,3331,006

(791,180)

46,159

BANKOFZAMBIA


33 Domestic currency liabilities to IMF

The above liability arises from IMF Quota subscriptions (Note 22) and has no repayment terms and bears no interest. Theincrease in value is onaccount of currency valuation adjustments between2018 and2017, as advisedby the IMF.

34. Foreigncurrency liabilities to IMF

a) The facility (formerly the Enhanced Structural Adjustment Facility (ESAF)) loan was obtained in 2002 and is repayablesemi-annually with the last payment due in 2021. The loan bears interest at one-half per cent per annum. The balance hasreducedon account of repayments and exchange ratemovements during the year.

b) The charges on theSDRallocation are levied by the IMF and repaid quarterly with full recovery from theGovernment of theRepublic of Zambia.

35 Employee benefits

A reconciliation of the net definedbenefit obligation is as shownbelow:

The Bank provides a pension scheme for all non-contract employees administered by a Board of Trustees who retainresponsibility for the governance of the plan including investment decisions and setting contribution levels. The assets of thisscheme are held in administered trust funds separate from the Bank's assets and are governed by the Pension SchemeRegulationAct, No. 26 of 1996.

The plan is a final salary pension plan, which provides benefits to members in the form of a guaranteed level of pensionpayable for life. The level of benefits provided depends onmembers' length of service and their salary in the final years leadingup to retirement. Pensions in payment are increasedat thediscretion of the Trusteesof theplan.

Contributions to the defined benefit fund are charged against income based upon actuarial advice. The employer is currentlycontributing at a rate of 15% of members' total basic salaries. Any deficits are funded to ensure the on-going financialsoundnessof the fund. 111

2017K'000

12,500,06933,281252

12,533,602

International Monetary Fund:Securities accountNo. 1 accountNo. 2 account

2018K'000

13,711,59636,506276

13,748,378

2017K'000

1,344,96520,753

1,365,718

Due to the International Monetary Fund:- Poverty Reduction and Growth Facility (PRGF) (a)- Charges on SDR allocation (b)

2018K'000

743,136(13,692)

729,444

2017K'000

--

-

Net asset at 1 JanuaryRemeasurements recognised in other comprehensive income

Net asset at 31 December

2018K'000

-

-

2017K'000

477,700(440,520)(37,180)

-

Fair value of plan assetsPresent value of defined benefit obligationsImpact of asset ceilingRecognised asset for defined benefit obligations

2018K'000

438,549(427,497)(11,052)

-

BANKOFZAMBIA


35 Employee benefits (Continued)

The plan's investment strategy is a Liability Driven Balanced portfolio designed tomeet the plans objectives to be able to payout benefits accruing under the plan. The strategy recognises that diversification is desirable tomanage and spread risk andendeavours to invest within the prescribed asset thresholds. Over 40% of the investment portfolio is invested in governmentbonds.

Theplan is exposed to a number of risks; themain ones being

(a) Asset volatility

The plan liabilities are calculated using a discount rate set with reference to Zambian government bond yields; if planassets underperform this yield, thiswill create a deficit.

(b) Changes in bondyields

A decrease in government bond yields will increase plan liabilities, although this will be partially offset by an increase inthe value of the plans' bondholdings.

(c) Life expectancy

The plan provides benefits for the life of the member, so increases in life expectancy will result in an increase in the plans'liabilities.

The defined benefit obligation is calculated by independent actuaries using the projected unit credit method after everythree years. However, the directors retain discretion to alter the timing of reviews to enable provision of reasonableestimates and more relevant information that achieves the fairest presentation. The latest actuarial review and valuationwas carried out byQuantumConsultants andActuaries on4March2019 in respect of results as at 31December 2018.

Remeasurements to be recognised in other comprehensive income:

The charge due to impact of asset ceiling arises due to the fact that even though the fund recorded an actuarial surplus, theBank as sponsor will not enjoy any break in contributions and should, therefore, not recognise an actuarial asset in its books.The asset stays in the fund to improve members' benefits. The most significant changes resulting in the gains highlightedabove are change in retirement age from55 years to 60 years for normal retirement and change in discount rate from18.5% in2017 to 17.0% in 2018.

112

2017K'00037,18063,7042,733

135,527(239,144)

-

Charge due to impact of asset ceilingReturn on plan assets (excluding amounts in net interest)Experience (gains)/lossesGain from change in financial assumptionsGain from change in demographic assumptions

Remeasurements

2018K'00011,05279,942(16,731)(30,865)(43,398)

-

BANKOFZAMBIA



Planassets comprise:

Actuarial assumptions

Principle actuarial assumptionsat the reportingdatewere:

Average life expectancy at normal retirement age60

Sensitivity of thedefinedbenefit obligation to actuarial assumptions

113

2017K'000

267,54226,23318,75752,972112, 197

477,700

276,64864,8749,1022,733

(53,364)135,527440,520

470,881114,0465,30916,925(12,392)(53,364)(63,704)477,700

Investment properties and equityTreasury billsFixed assets and corporate bondsOther assetsGRZ bonds

Total plan assets

Movement in the present value of the defined benefit obligationsover the period

Defined benefit obligations at 1 JanuaryInterest costCurrent service costExperience (gains)/lossesBenefits paid by the planGains from change in financial assumptionsDefined benefit obligations at 31 December

Movement in the present value of plan assetsFair value of plan assets at 1 JanuaryInterest income on plan assetsEmployee contributionsEmployer contributionsAdministration expensesBenefits paid by the planReturn on plan assets, excluding interestFair value of plan assets at 31 December

2018K'000

237,44833,74625,76731,045110,543

438,549

440,52082,9758,506

(16,731)(56,908)(30,865)427,497

477,70085,2825,29616,693(9,573)(56,908)(79,941)438,549

2016K'0008.0%10.0%18.5%18.5%8.0%

Future pension increaseSalary increase (p.a)Discount rate (p.a)Expected return on plan assetsInflation rate

2018K'0008.0%8.0%17.0%17.0%8.0%

2017K'00018.320.5

MaleFemale

2018K'00018.320.5

BANKOFZAMBIA



The sensitivity of the defined benefit obligation to significant actuarial assumptions has been calculated based on samemethod (present value of the defined benefit obligation calculated with the projected unit credit method at the end of thereportingperiod) usedwhen calculating the pension liability recognisedwithin the statement of financial position.

The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice,this is unlikely to occur, and changes in someof the assumptionsmaybe correlated

36 SDRallocation

This represents Special Drawing Rights allocated by the IMF amounting to SDR 469,137,515, 2017: SDR 469,137,515. Thepurpose of the allocations is to improve an IMF member country's foreign exchange reserves assets. The amount is notrepayable to IMF except in the event that (a) the allocation is withdrawn or cancelled; (b) themember country leaves the IMF;or (c) the SDR department of the IMF is liquidated. The translation rate for end of year was ZMW16.5835 per SDR (2017:ZMW14.187)

37 Capital

The GRZ is the sole subscriber to the paid up capital of the Bank and its holding is not transferable in whole or in part nor is itsubject to any encumbrance.

38. Reserves

General reserve fund

The General Reserve Fund represents appropriations of profit in terms of Section 8 of the Bank of Zambia Act No. 43 of1996.

Under Section 8 of theBankof ZambiaAct, No 43of 1996, if theBankof ZambiaBoard ofDirectors certifies that the assets ofthe Bank are not, or after such transfer, will not be less than the sum of its capital and other liabilities, then the followingappropriation is required to bemade to the general reserve fund:

(a) 25% of the net profits for the year, when the balance in the general reserve fund is less than three times the Bank'sauthorised capital; or

(b) 10% of the net profits for the year, when the balance in the general reserve fund is equal to or greater than three times theBank's authorised capital.

114

2017K'000

-36,647+42,291

+16,441-15,222

+27,718-24,582

-5,286+4,625

Discount rate- increase by 1%- decrease by 1%

Salary- increase by 1%- decrease by 1%

Future pension- increase by 1%- decrease by 1%

Life expectancy- increase by 1%- decrease by 1%

2018K'000

-34,045+39,069

+14,761-13,745

+26,190-23,293

-5,214+4,652

2017K'000

500,020

500,020

Authorised capital

Issued and fully paid up capital

2018K'000

500,020

500,020

BANKOFZAMBIA


115

38. Reserves (Continued)

The balance of the net profits after the above transfers should be applied to the redemption of any outstandingGRZ securitiesissuedagainst losses incurredby theBank.

Section 7 of the Bank of Zambia Act, provides that the remainder of the profits after the above transfers should be paid to theGRZwithin sixty days following the auditor's certification of theBank's financial statements.

Property revaluation reserveThis represents effects from the periodic fair value measurement of the Bank's properties. Any gains or losses are notrecognised in the profit or loss until the property has been sold or impaired. On derecognition of an item of property, therevaluation surplus included in equity is transferred directly to retained earnings. A portion of the revaluation surplusrepresenting the difference between depreciation based on the revalued carrying amount of the property and depreciationbasedon the asset's original cost as the property is usedby theBank is transferred to retained earnings.

Retained earningsRetained earnings or losses are the carried forward income net of expenses of the Bank plus current year profit or lossattributable to equity holders. This is a holding account before the residual income is remitted to GRZ in accordance with theprovisionsof Section 7 of theBankof ZambiaAct, No43of 1996.

AppropriationofprofitsIn accordance with Sections 7 and 8 of the Bank of Zambia Act 43, 1996 Management has proposed appropriation of profitsresulting in a transfer of K332.4 million to the general reserve fund and declaration of a dividend K1,693.3 million toGovernment in respect of theperformance recorded in theBankof Zambia Financial Statements for the 2018 financial year.

39 Related party transactions

TheBank is ownedandcontrolled by theGovernment of theRepublic of Zambia.

In the context of theBank, relatedparty transactions include any transactions entered intowith any of the following:

! TheGovernment of theRepublic of Zambia;! Government bodies;! KwachaPensionTrust Fund;! ZambiaElectronicClearingHouse;! Members of theBoard ofDirectors including theGovernor;! Keymanagement personnel;! Close familymembers of keymanagement personnel including themembers of theBoard ofDirectors.

Themain servicesduring the year to 31December 2018were:! Provisionof banking services includingholding theprincipal accounts ofGRZ;! Provision and issueof notes and coins;! Holding andmaintaining the register ofGovernment securities;! Implementationofmonetary policy; and! Supervisionof financial institutions.

Commitments on behalf of the GRZ arising from the issue of Treasury Bills and bonds are not included in these financialstatements as theBank is involved in such transactionsonly as an agent.

During the year, the nature of dealings with GRZ included: banking services, sale of foreign currency and agency services forthe issuanceof securities culminating in the incomeandbalances stated in (a) and (b) below:

a) Listed below was income earned in respect of interest, charges or fees on the transactions with GRZ for the year up to 31December:

All transactionswith related partiesweremadeon anarm's lengthbasis.

2017K'000

267,6951,259,95096,69426,629

1,650,968

Interest on GRZ securities at FVOCIInterest on advances to GRZFees and commission income on transactions with GRZProfit on foreign exchange transactions with GRZ

Total

2018K'000

337,952411,46684,32382,247

915,988

BANKOFZAMBIA


116

39 Related party transactions (Continued)

b) Listedbelowwereoutstandingbalances at closeof businesson 31December:

The GRZ securities holdings comprise of various balances outstanding from GRZ (see note 16) secured by predeterminedpayments basedon securities issuedby theGovernment of theRepublic of Zambia. The remuneration ismarket based.

Deposits fromGRZ Institutions are unremunerated andattract no interest expense.

No provisionswere recognised in respect of balances due fromGRZ and neither was any expense recorded in respect of baddebts.

Transactionsandbalanceswithdirectorsand keymanagement personnel

Remunerationpaid toDirectors' and keymanagement personnel during the yearwas as follows:

a) Short-termbenefits

The terms and conditions on the loans and advances to key management personnel are determined by the directors, fromtime to time,with reference to theprevailingmarket interest rates andmay vary for different classesof loans andmaturities.

No impairment hasbeen recognised in respect of balancesdue fromdirectors andkeymanagement personnel.

40 Contingent liabilities

The Bank is party to various litigation cases, whose ultimate resolution, in the opinion of the Directors, is not expected tomaterially impact the financial statements.

41 Eventsafter the reportingdate

There havebeenno significant events subsequent to 31December 2018 to bedisclosed.

2017K'000

(3,070,560)2,047,8287,474,994

2017K'000830

31,4041,734

33,968

5,659

GRZ - year end balancesDeposits from GRZ InstitutionsHoldings of GRZ securitiesBudgetary advances to the Government

Directors' feesRemuneration for key management personnel- Salaries and allowances- Pension contributions

Loans and advances to key management personnelBalance at 31 December

2018K'000

(1,840,715)3,994,0856,912,233

2018K'0001,230

39,9591,794

41,753

3,924

2017K'000

12,632b) Post-employmentpensionbenefits

2018K'000

6,659

BANKOFZAMBIA


2018 Annual Statistical Annexures9.0

9.0 2018 ANNUALSTATISTICALANNEXURES

TABLENO. DESCRIPTION PAGE

Table 1 119

Table 2 Central Bank Survey (K'Millions), Dec 2016 - Dec 2018 120

Table 3 Other Depository Corporations Survey (K'Millions), Dec 2016 - Dec 2018 121

Table 4 Banking SystemClaims onGovernment (K' Millions), Dec 2010 - Dec 2018 122

Table 5 Currency in Circulation (K' Million), Dec. 2010 - Dec. 2018 123

Table 6A Commercial Banks' Deposits by Institution-Domestic Currency (K' Million),

Jan 2016 - Dec 2018 124

Table 6B Commercial Banks' Deposits by Institution-Foreign Currency (K' Million),

Jan 2016 - Dec 2018 125

Table 7A Commercial Banks' Loans andAdvances - Local Currency (K' Million),

Dec 2016 - Dec 2018 126

Table 7B Commercial Banks' Loans andAdvances - Foreign Currency (US $' 000),

Dec. 2016 - Dec. 2018 127

Table 8 Structure of Interest Rates (Percent perYear), Dec 2011 - Dec 2018 128

Table 9 Commercial Bank Interest Rates (Percent PerYear), Dec 2010 - Dec 2018 129

Table 10 Kwacha/US Dollar Exchange Rates, Dec 2011 - Dec 2018 130

Table 11 Commercial Banks Foreign Exchange Rates, Jan 2016 - Dec 2018 131

Table 12 Foreign ExchangeTransactions (US $Million), Dec 2010 - Dec 2018 132

Table 13 PercentageChanges in the Consumer Price Indices

( 2009 weights - Base 2009 = 100), Jan 2016 - Dec 2018 133

Table 14 Treasury Bill Transactions (K' Million), Dec 2010 - Dec 2018 134

Table 15 GRZ BondsOutstanding (K' Million), Jan. 2016 - Dec. 2018 135

Table 16 Metal Production and Exports (MetricTonnes), 2010 - 2018 136

Depository Corporations Survey (K'Millions), Dec 2016 - Dec 2018

118

119

NET

FOREIGNASSETS

CLAIMSON

NON

RESIDENTS

LIABILITIESTO

NON

RESIDENTS

DOMESTICCLAIMS

NET

CLAIMSON

CENTRAL

GOVERN

MEN

TCLAIMSON

CENTRAL

GOVERN

MEN

TLIABILITIESTO

CENTRAL

GOVERN

MEN

TCLAIMSON

OTHER

SECTOR

SCLAIMSON

OTHER

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

STATEAN

DLOCALGO

VERN

MEN

TCLAIMSON

PUBLICNON

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

PRIVATESECTOR

BROA

DMON

EYLIABILITIES

CURREN

CYOU

TSIDEDEPOSITORY

CORPOR

ATIONS

TRAN

SFERABLE

DEPOSITS

OTHER

DEPOSITS

SECURITIES

OTHER

THAN

SHARES

DEPOSITS

EXCLUD

EDFROM

BROA

DMON

EYSECURITIES

OTHER

THAN

SHARES

EXCLUD

EDFROM

BROA

DMON

EYLOAN

SFINA

NCIAL

DERIVATIVES

INSURANCE

TECH

NICAL

RESERVES

SHARES

ANDOTHER

EQUITY

OTHER

ITEM

S(NET)

IFSVerticalCheck

Dec-16

21,895

36,519

-14,624

41,339

14,606

22,287

-7,681

26,733 284 74 223

26,152

44,567

4,782

24,510

15,275 0 47 0

2,767 0 0

Dec-17

21,990

35,611

-13,621

53,587

25,323

33,613

-8,290

28,264 289 36 412

27,527

54,100

5,669

28,393

20,037 0 47 0

2,589 0 0

18,412 429 0

Jan-18

20,010

33,431

-13,422

54,794

26,814

33,923

-7,109

27,980 277 32 387

27,284

53,133

5,179

27,947

20,006 0 36 0

2,450 0 0

17,885

1,299 0

Feb-18

20,060

34,061

-14,001

54,705

26,682

34,822

-8,139

28,023 268 39 363

27,354

53,391

4,948

27,577

20,866 0 36 0

2,467 0 0

18,167 704 0

Mar-18

17,848

31,307

-13,459

54,998

27,093

34,144

-7,051

27,905 250 35 335

27,286

51,471

5,242

26,046

20,183 0 36 0

2,502 0 0

17,953 885 0

Apr-18

18,822

32,339

-13,517

54,093

25,629

34,532

-8,902

28,463 255 50 399

27,759

52,795

5,394

27,002

20,399 0 36 0

2,361 0 0

17,525 197 0

May-18

20,776

34,574

-13,797

56,276

26,743

34,493

-7,750

29,532 261 49 403

28,820

55,835

5,787

28,750

21,298 0 36 0

2,411 0 0

18,073 696 0

Jun-18

21,901

34,670

-12,770

54,716

25,405

34,578

-9,173

29,311 253 49 368

28,641

55,252

6,169

28,443

20,641 0 36 0

2,530 0 0

17,698

1,100 0

Jul-1

820,964

33,220

-12,257

55,431

26,058

34,418

-8,361

29,373 300 67 333

28,673

55,093

5,813

29,530

19,750 0 36 0

2,749 0 0

17,777 739 0

Aug-18

20,919

33,667

-12,748

57,193

27,149

34,492

-7,343

30,044 263 59 367

29,355

55,654

6,097

30,133

19,424 0 36 0

2,524 0 0

18,492

1,405 0

Sep-18

25,071

40,330

-15,259

62,432

28,935

36,712

-7,778

33,497 305 50 399

32,744

62,433

6,208

34,500

21,725 0 36 0

2,871 0 0

20,865

1,298 0

Oct-1

823,503

37,792

-14,289

59,076

26,404

37,376

-10,972

32,672 315 56 447

31,854

58,044

6,362

31,594

20,088 0 36 0

2,500 0 0

20,672

1,328 0

Nov-18

23,895

38,064

-14,169

62,237

29,088

38,743

-9,655

33,149 455 68 507

32,119

60,828

6,177

33,304

21,347 0 36 0

2,466 0 0

20,611

2,192 0

Depository

Corporations

Survey

(K'Millions),De

c201

6-D

ec20

18Table1

Source:BankofZambia

Dec-18

24,810

39,325

-14,515

62,219

28,998

37,926

-8,928

33,222 549 67 489

32,117

62,997

6,500

34,886

21,611 0 36 0

2,423 0 0

20,591 982 0

120

NET

FOREIGNASSETS

CLAIMSON

NON

RESIDENTS

LIABILITIESTO

NON

RESIDENTS

CLAIMSON

OTHER

DEPOSITORY

CORPOR

ATIONS

NET

CLAIMSON

CENTRAL

GOVERN

MEN

TCLAIMSON

CENTRAL

GOVERN

MEN

TLIABILITIESTO

CENTRAL

GOVERN

MEN

TCLAIMSON

OTHER

SECTOR

SCLAIMSON

OTHER

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

STATEAN

DLOCALGO

VERN

MEN

TCLAIMSON

PUBLICNON

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

PRIVATESECTOR

MON

ETARYBASE

CURREN

CYINCIRCULATION

LIABILITIESTO

OTHER

DEPOSITORY

CORPOR

ATIONS

LIABILITIESTO

OTHER

SECTOR

SOTHER

LIABILITIESTO

OTHER

DEPOSITORY

CORPOR

ATIONS

DEPOSITS

ANDSECURITIES

OTHER

THAN

SHARES

EXCLUD

EDFROM

MON

ETARYBASE

DEPOSITS

ExCLUD

EDINBROA

DMON

EYSECURITIES

OTHER

THAN

SHARES

INCLUD

EDINBROA

DMON

EYDEPOSITS

EXCLUD

EDFROM

BROA

DMON

EYSECURITIES

OTHER

THAN

SHARES

EXCLUD

EDFROM

BROA

DMON

EYLOAN

SFINA

NCIAL

DERIVATIVES

SHARES

ANDOTHER

EQUITY

OTHER

ITEM

S(NET)

IFSVerticalCheck

Dec-16

15,230

23,304

-8,074 290

9,940

11,547

-1,606 92 0 0 0 92

18,324

6,551

11,742 32 0 0 0 0 0 0 0 0

6,886

343 0

Dec-17

12,712

20,804

-8,093 225

10,130

13,201

-3,071 89 0 0 0 89

14,037

7,415

6,583 40 0 15 15 0 0 0 0 0

8,116

989 0

Jan-18

10,819

18,716

-7,897 215

11,370

13,329

-1,959 88 0 0 0 88

13,470

6,736

6,682 51 0 0 0 0 0 0 0 0

7,971

1,051 0

Feb-18

10,394

18,275

-7,882 223

9,831

13,441

-3,609 89 0 0 0 89

11,418

6,427

4,918 73 0 0 0 0 0 0 0 0

8,058

1,062 0

Mar-18

8,821

16,564

-7,743 232

11,552

13,474

-1,922 91 0 0 0 91

12,106

6,720

5,306 79 0 0 0 0 0 0 0 0

7,827

763 0

Apr-18

9,646

17,777

-8,131 231

8,853

12,426

-3,573 93 0 0 0 93

11,066

6,804

4,212 50 0 0 0 0 0 0 0 0

7,298

459 0

May-18

10,111

18,143

-8,032 225

10,382

12,598

-2,216 94 0 0 0 94

12,283

7,283

4,956 44 0 0 0 0 0 0 0 0

7,788

741 0

Jun-18

10,498

18,110

-7,612 249

10,396

12,548

-2,152 92 0 0 0 92

13,064

7,784

5,231 49 7 0 0 0 0 0 0 0

7,412

752 0

Jul-1

810,146

17,690

-7,544 215

9,899

12,618

-2,719 90 0 0 0 90

12,544

7,673

4,823 48 13 0 0 0 0 0 0 0

7,516

276 0

Aug-18

10,143

17,890

-7,747 218

11,510

13,003

-1,493 93 0 0 0 93

13,239

7,726

5,471 41 10 0 0 0 0 0 0 0

7,985

731 0

Sep-18

10,955

20,236

-9,281 224

13,805

15,382

-1,577 93 0 0 0 93

13,826

7,617

6,166 43 8 0 0 0 0 0 0 0

10,271 972 0

Oct-1

810,340

18,988

-8,648 191

12,258

15,540

-3,281 92 0 0 0 92

12,198

7,949

4,201 48 17 0 0 0 0 0 0 0

9,859

807 0

Nov-18

10,613

19,277

-8,664 200

12,964

15,542

-2,578 93 0 0 0 93

13,084

7,692

5,346 46 9 0 0 0 0 0 0 0

10,026 752 0

Dec-18

10,256

18,827

-8,571 131

13,204

15,044

-1,841 94 0 0 0 94

13,557

8,292

5,209 56 0 0 0 0 0 0 0 0

10,248

-120 0

CentralB

ankSurvey

(K’Millions),De

c201

6-D

ec20

18Table2

Source:BankofZambia

121

NET

FOREIGNASSETS

CLAIMSON

NON

RESIDENTS

LIABILITIESTO

NON

RESIDENTS

CLAIMSON

CENTRAL

BANK

CURREN

CYRESERVEDEPOSITS

ANDSECURITIES

OTHER

THAN

SHARES

OTHER

CLAIMSON

CENTRAL

BANK

NET

CLAIMSON

CENTRAL

GOVERN

MEN

TCLAIMSON

CENTRAL

GOVERN

MEN

TLIABILITIESTO

CENTRAL

GOVERN

MEN

TCLAIMSON

OTHER

SECTOR

SCLAIMSON

OTHER

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

STATEAN

DLOCALGO

VERN

MEN

TCLAIMSON

PUBLICNON

FINA

NCIAL

CORPOR

ATIONS

CLAIMSON

PRIVATESECTOR

LIABILITIESTO

CENTRAL

BANK

TRAN

SFERABLE

DEPOSITS

INCLUD

EDINBROA

DMON

EYOTHER

DEPOSITS

INCLUD

EDINBROA

DMON

EYSECURITIES

OTHER

THAN

SHARES

INCLUD

EDINBROA

DMON

EYDEPOSITS

EXCLUD

EDFROM

BROA

DMON

EYSECURITIES

OTHER

THAN

SHARES

EXCLUD

EDFROM

BROA

DMON

EYLOAN

SFINA

NCIAL

DERIVATIVES

INSURANCE

TECH

NICAL

RESERVES

SHARES

ANDOTHER

EQUITY

OTHER

ITEM

S(NET)

IFSVerticalCheck

Dec-16

6,665

13,215

-6,550

14,092

1,769

12,323 0

4,666

10,741

-6,075

26,641 284 74 223

26,060 177

24,479

15,275 0 47 0

2,767 0 0

9,253 67 0

Dec-17

9,278

14,807

-5,529

8,921

1,746

7,175 0

15,193

20,412

-5,219

28,174 289 36 412

27,437 339

28,354

20,022 0 47 0

2,589 0 0

10,297 -80 0

Jan-18

9,191

14,715

-5,524

9,243

1,557

7,686 0

15,444

20,594

-5,150

27,891 277 32 387

27,195 384

27,896

20,006 0 36 0

2,450 0 0

9,913

1,083 0

Feb-18

9,667

15,786

-6,119

7,534

1,479

6,054 0

16,851

21,381

-4,530

27,934 268 39 363

27,264 97

27,504

20,866 0 36 0

2,467 0 0

10,109 905 0

Mar-18

9,027

14,742

-5,716

7,493

1,479

6,014 0

15,542

20,671

-5,129

27,814 250 35 335

27,195 114

25,967

20,183 0 36 0

2,502 0 0

10,126 948 0

Apr-18

9,176

14,562

-5,387

6,080

1,409

4,671 0

16,776

22,106

-5,330

28,371 255 50 399

27,666 709

26,952

20,399 0 36 0

2,361 0 0

10,226

-281 0

May-18

10,665

16,431

-5,765

7,233

1,496

5,737 0

16,361

21,896

-5,534

29,439 261 49 403

28,726 187

28,706

21,298 0 36 0

2,411 0 0

10,286 775 0

Jun-18

11,402

16,560

-5,158

7,612

1,616

5,996 0

15,009

22,030

-7,021

29,219 253 49 368

28,549 97

28,394

20,641 0 36 0

2,530 0 0

10,286

1,258 0

Jul-1

810,818

15,531

-4,713

7,240

1,860

5,379 0

16,159

21,800

-5,641

29,283 300 67 333

28,583 566

29,482

19,750 0 36 0

2,749 0 0

10,261 655 0

Aug-18

10,776

15,777

-5,001

7,910

1,630

6,281 0

15,639

21,489

-5,850

29,951 263 59 367

29,262 108

30,092

19,424 0 36 0

2,524 0 0

10,507

1,584 0

Sep-18

14,116

20,094

-5,978

8,460

1,409

7,051 0

15,130

21,330

-6,200

33,404 305 50 399

32,651 240

34,457

21,725 0 36 0

2,871 0 0

10,594

1,188 0

Oct-1

813,163

18,804

-5,641

6,566

1,586

4,980 0

14,146

21,837

-7,691

32,580 315 56 447

31,763 178

31,545

20,088 0 36 0

2,500 0 0

10,813

1,295 0

Nov-18

13,282

18,787

-5,505

7,749

1,515

6,234 0

16,124

23,201

-7,077

33,056 455 68 507

32,026 111

33,258

21,347 0 36 0

2,466 0 0

10,584

2,409 0

OtherD

eposito

ryCorporations

Survey

(K'Millions),De

c201

6-D

ec20

18,

Table3

Dec-18

14,554

20,498

-5,944

7,744

1,792

5,952 0

15,794

22,881

-7,087

33,128 549 67 489

32,024 360

34,831

21,611 0 36 0

2,423 0 0

10,343

1,617 0

Source:BankofZambia

122

Treasury

Bills

2,307,851

4,090,179

4,394,320

6,566,195

6,572,940

6,184,432

5,053,719

4,686,619

5,099,797

4,644,970

4,594,730

4,934,451

4,692,281

4,736,525

4,622,724

4,619,419

4,942,188

5,471,395

5,471,395

7,577,534

9,293,325

9,754,453

9,559,622

11,159,372

11,451,834

11,758,641

13,172,302

13,172,302

11,348,072

12,035,101

11,966,282

12,345,859

12,298,107

12,030,059

12,571,494

11,927,786

11,029,420

11,215,479

10,492,695

10,784,961

13,098,757

12,117,440

GRZ

Securities

1,901,191

2,694,134

2,726,082

2,653,511

2,362,441

1,568,434

1,500,345

1,443,653

1,476,754

1,597,703

1,844,184

1,822,452

1,770,125

1,801,004

1,904,953

1,856,030

2,196,271

2,249,459

2,249,459

2,174,704

2,731,099

2,851,161

2,658,382

2,584,524

2,909,810

2,985,571

3,787,870

3,787,870

3,591,417

4,348,929

4,692,282

4,368,459

4,894,516

5,406,954

5,361,194

5,403,384

5,443,940

5,541,946

5,520,105

5,270,662

5,955,483

6,202,396

Loans&

Advances

269,535

441,975

10,136

120,598

661,321

457,566

469,811

470,611

468,415

448,429

741,239

740,257

726,350

719,947

727,362

846,758

834,479

819,317

815,451

813,878

828,939

973,151

957,769

932,026

930,291

902,682

905,744

902,171

885,124

844,388

839,347

880,591

919,599

873,310

839,585

1,058,357

1,066,092

1,040,784

1,153,965

1,257,202

1,576,097

1,576,097

Deposits

-479,455

-823,616

-1,150,580

-1,158,763

-1,573,725

-1,539,557

-1,394,082

-813,755

-1,142,627

-1,282,845

-1,561,770

-1,258,766

-935,571

-618,343

-1,196,583

-896,635

-1,095,530

-1,762,939

-1,317,548

-1,324,221

-1,213,304

-1,164,823

-1,387,937

-1,342,808

-1,811,915

-1,454,005

-1,439,466

-1,323,839

-1,418,161

-1,631,315

-1,570,645

-1,361,107

-1,546,782

-1,486,291

-1,685,619

-1,509,087

-1,245,300

-1,420,623

-1,596,075

-1,947,060

-1,395,959

-1,395,959

(b)

Total

4,019,602

6,402,671

5,979,958

8,181,540

8,022,977

6,670,875

5,629,794

5,787,129

5,902,339

5,408,257

5,618,383

6,238,395

6,253,185

6,639,133

6,058,457

6,425,571

6,877,408

6,777,232

7,218,756

9,241,895

11,640,059

12,413,941

11,787,835

13,333,113

13,480,020

14,192,890

16,426,451

16,538,504

14,406,452

15,597,104

15,927,267

16,233,801

16,565,440

16,824,031

17,086,654

16,880,439

16,294,152

16,377,586

15,570,689

15,365,766

19,234,379

18,499,975

(a+b)

TOTAL

CLAIMS

2,349,954

4,427,063

4,929,512

8,843,168

7,106,630

8,988,120

6,798,749

8,572,921

7,937,414

7,447,477

8,341,003

9,497,047

11,951,839

12,884,940

11,372,098

12,296,697

11,795,824

12,735,195

12,476,888

15,312,478

15,802,988

14,746,082

16,191,572

16,316,683

16,153,958

18,087,610

22,191,960

20,805,485

19,494,731

20,124,988

20,154,418

20,326,988

21,574,822

20,745,122

20,644,910

21,741,728

19,539,233

21,284,458

22,954,633

21,397,911

25,871,423

26,207,577

NetB

ankofZambiaClaims

NetCom

mercialBa

nksC

laim

sTreasury

Bills

625,812

655,064

537,014

625,775

710,826

1,277,346

1,121,835

957,715

900,970

724,248

652,407

664,845

655,466

655,466

648,184

648,184

647,468

647,468

647,468

629,182

142,212

514,590

534,890

296,810

116,376

625,775

761,976

761,976

774,836

625,775

765,661

692,578

542,290

1,031,139

771,158

657,894

966,592

625,775

761,824

1,173,953

625,775

642,938

GRZ

Stock

188,983

1,310,989

1,310,989

1,800,989

1,714,918

1,650,173

1,489,339

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,444,323

1,314,323

1,292,448

1,314,323

1,314,323

1,314,325

1,314,325

1,314,323

1,309,956

1,309,956

1,314,325

1,314,325

1,314,325

1,314,325

1,314,325

1,314,325

1,314,325

1,314,325

1,394,219

1,314,325

2,879,596

3,137,582

3,193,863

3,960,458

GRZ

Position(3)

-2,369,565

-4,154,662

-3,535,450

-3,595,676

-4,739,630

-2,607,813

-3,439,765

-1,613,787

-1,381,818

-1,943,353

-1,960,125

-1,571,531

-1,722,150

-1,174,998

-2,099,881

-1,542,396

-2,494,390

-1,454,843

-2,154,691

-1,193,938

-2,592,747

-4,817,787

-2,766,491

-3,948,580

-4,077,779

-3,366,392

-1,627,438

-3,125,966

-2,321,896

-2,733,231

-3,173,850

-3,234,731

-2,168,248

-2,831,088

-2,933,944

-1,517,653

-3,522,457

-1,439,955

-664,204

-2,686,121

-1,589,309

-1,302,509

Loans&

Advances 0

213,000

637,000

1,830,539

1,397,539

1,997,539

1,997,546

1,997,540

1,071,600

1,814,002

2,586,015

2,721,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,032

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

5,321,015

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

4,406,715

(a)

Total

-1,554,770

-1,975,608

-1,050,447

661,628

-916,347

2,317,245

1,168,955

2,785,792

2,035,075

2,039,220

2,722,620

3,258,652

5,698,654

6,245,806

5,313,642

5,871,126

4,918,416

5,957,963

5,258,132

6,070,582

4,162,928

2,332,140

4,403,737

2,983,570

2,673,937

3,894,721

5,765,509

4,266,981

5,088,280

4,527,884

4,227,151

4,093,187

5,009,382

3,921,091

3,558,256

4,861,289

3,245,081

4,906,872

7,383,944

6,032,145

6,637,044

7,707,602

Bank

ingSystem

Claimso

nGo

vernment(K'Millions),De

c201

0-D

ec20

18Table4

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source:BankofZambia

123

Issued

Atbanks

Outsidebanks

Endofperiod

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Total

2,750

3,408

3,843

4,601

5,728

6,450

5,558

5,165

5,574

5,500

5,621

6,216

6,503

6,274

5,870

5,829

5,791

6,452

5,737

5,579

5,644

5,776

6,044

6,597

6,349

6,479

6,615

6,753

6,722

7,315

6,638

6,329

6,622

6,706

7,185

7,687

7,576

7,627

7,518

7,851

7,594

8,195

Notes

2,750

3,408

3,843

4,551

5,620

6,318

5,422

5,026

5,433

5,358

5,477

6,069

6,353

6,122

5,716

5,672

5,633

6,292

5,575

5,413

5,478

5,608

5,874

6,432

6,182

6,309

6,441

6,577

6,543

7,135

6,454

6,143

6,437

6,522

7,000

7,499

7,378

7,425

7,316

7,646

7,388

7,987

Coin 0 0 0 50 107

132

136

139

141

142

144

147

150

152

154

157

159

159

162

165

166

167

169

165

167

171

174

176

179

181

183.5

185.4

184.9

184.2

185.5

188.8

198.0

201.9

202.6

204.8

205.8

207.5

Total

506

598

801

1,130

1,508

1,699

1,419

1,216

1,564

1,343

1,349

1,427

1,393

1,351

1,361

1,300

1,181

1,714

1,341

1,359

1,359

1,382

1,556

1,686

1,460

1,536

1,422

1,548

1,602

1,716

1,490

1,408

1,436

1,369

1,438

1,569

1,810

1,586

1,354

1,539

1,468

1,757

Notes

506

598

801

1,094

1,504

1,693

1,411

1,211

1,556

1,332

1,335

1,415

1,377

1,339

1,348

1,287

1,169

1,706

1,329

1,346

1,347

1,367

1,541

1,674

1,447

1,524

1,409

1,535

1,589

1,702

1,475

1,392

1,421

1,355

1,424

1,555

1,797

1,573

1,339

1,523

1,452

1,740

Currency

inCirculation(K'M

illion),Dec.201

0-D

ec.201

8Table5

coin 0 0 0 36 4 6 8 6 8 11 14 12 16 12 13 13 12 8 12 13 12 15 15 12 12 13 13 12 12 13 15 16 15 14 14 13 13 13 15 16 16 17

Total

2,244

2,810

3,042

3,471

4,220

4,751

4,139

3,948

4,010

4,157

4,273

4,789

5,109

4,923

4,509

4,529

4,610

4,737

4,396

4,220

4,284

4,394

4,488

4,911

4,889

4,943

5,193

5,206

5,120

5,600

5,148

4,921

5,186

5,337

5,747

6,119

5,767

6,041

6,164

6,312

6,126

6,438

Notes

2,244

2,810

3,042

3,457

4,117

4,625

4,011

3,815

3,877

4,026

4,142

4,654

4,976

4,784

4,368

4,385

4,464

4,587

4,247

4,067

4,131

4,241

4,333

4,759

4,735

4,785

5,032

5,042

4,954

5,432

4,979

4,752

5,016

5,167

5,576

5,943

5,582

5,852

5,977

6,123

5,936

6,247

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source:BankofZambia

Coin 0 0 0 14 103

126

128

133

133

131

130

135

134

140

141

144

147

151

149

153

154

153

154

152

154

158

161

164

166

167

169

169

170

170

172

175

185

188

187

189

190

191

124

EndofPeriod

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Statutory

Bodies

1,925

1,890

2,036

1,968

1,917

2,308

2,106

2,104

1,905

1,863

1,830

2,738

2,980

2,434

1,845

2,077

1,990

2,113

2,172

1,769

1,703

2,211

1,856

1,353

1,363

1,281

1,721

1,601

1,724

3,097

2,022

1,861

1,648

2,340

2,651

2,766

Parastatal

Bodies

566

578

782

278

408

244

269

765

1,814

684

764

599

545

608

1,070

662

753

821

931

910

857

879

938

1,102

1,286

1,174

1,021

1,083

996

813

801

828

1,129

798

843

834

Privatecorporations

andpartnerships

8,643

8,764

8,567

8,892

9,065

8,373

8,283

8,487

7,763

8,311

9,000

7,768

6,788

8,292

8,599

8,157

8,609

8,196

8,480

8,829

8,336

8,803

9,010

9,953

9,401

9,424

9,144

9,561

10,478

10,300

11,413

11,812

11,640

10,049

11,161

11,540

Individu

alsa

ndhouseholds

6,277

6,526

6,182

6,610

7,106

7,114

7,415

7,231

7,183

7,804

7,340

8,136

8,094

7,083

8,627

8,874

9,037

8,577

9,192

9,686

9,820

9,249

9,423

9,591

9,571

9,182

9,118

9,501

9,815

8,388

9,273

9,305

9,930

9,850

10,297

10,328

OtherF

in.

institu

tions

3,509

3,322

3,604

3,253

2,499

3,199

3,591

3,401

3,178

3,637

3,902

4,169

4,010

6,230

4,740

5,130

5,419

6,082

5,313

5,428

6,177

6,344

6,113

5,659

6,205

5,773

5,952

5,551

5,809

5,707

5,490

5,171

5,532

5,125

5,108

5,475

CommercialBa

nks'De

positsby

Institu

tion-Do

mestic

Currency

(K'M

illion),Jan

2016

-Dec

2018

Table6A

Non-resident

273

242

224

159

197

163

201

233

236

266

270

223

349

259

266

288

347

280

413

362

784

380

329

365

369

361

321

237

194

176

167

323

136

148 76 82

Total

22,983

22,575

22,882

22,807

23,092

23,048

23,225

23,153

23,554

23,728

24,542

25,853

24,399

26,601

26,802

26,685

27,896

27,768

28,815

28,930

29,659

29,809

29,641

30,273

30,343

29,161

29,408

29,503

31,093

30,526

31,035

31,916

32,459

31,156

32,190

32,897

Government

1,791

1,252

1,488

1,647

1,900

1,646

1,361

934

1,474

1,164

1,436

2,220

1,632

1,694

1,655

1,498

1,742

1,698

2,315

1,946

1,983

1,943

1,972

2,250

2,148

1,964

2,131

1,970

2,076

2,045

1,869

2,617

2,445

2,845

2,054

1,872

2016

2017

2018

Source:BankofZambia

125

EndofPeriod

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

StatutoryBo

dies

105

218

117 98 101 89 88 81 88 91 112 88 98 380

281

123

243 49 140

177

188

380

486

491

430

210

187

170

192

326

339

474

715

880

721

593

Parastatal

Bodies

690

520

393

1,192

915

778

557

1,090

579

427

377

320

426

550

551

503

559

608

539

643

595

631

768

646

678

583

413

530

419

381

369

427

473

402

550

602

Privatecorporations

andpartnerships

14,543

15,427

14,618

13,099

15,936

12,984

14,624

11,179

12,277

11,813

13,210

12,282

12,840

11,651

12,133

12,254

11,785

11,775

10,911

12,208

12,553

12,851

13,382

14,202

13,282

14,475

13,248

13,680

15,016

14,406

14,044

13,836

17,385

15,342

16,498

17,483

Individu

alsa

ndhouseholds

2,775

2,767

2,794

2,693

2,961

2,746

2,497

2,476

2,841

2,722

2,917

2,538

2,931

2,752

2,688

2,592

2,505

2,764

2,426

2,434

2,146

2,406

2,610

2,701

3,043

3,308

3,131

3,207

3,112

4,522

3,099

3,187

3,962

4,214

3,910

3,953

OtherF

in.

institu

tions

3,517

2,991

2,851

2,349

1,164

2,422

2,499

2,607

2,521

2,551

2,562

2,619

2,863

2,503

2,246

2,142

2,107

2,064

2,184

2,262

2,347

2,319

2,525

2,364

2,381

2,593

2,324

2,835

2,802

2,921

2,942

3,283

3,965

3,927

4,074

3,967

CommercialBa

nks'De

positsby

Institu

tion-ForeignCurrency

(K'M

illion),Jan

2016

-Dec

2018

Table6B

Non-resident

1,360

1,069

890

816

1,136

1,112

1,293

2,621

3,124

2,227

2,015

2,548

2,757

2,649

3,612

3,558

3,574

3,647

2,746

2,911

2,578

2,179

2,403

2,389

2,395

2,556

2,704

2,457

2,828

2,425

1,837

1,907

2,445

1,929

885

699

Total

23,328

23,294

22,208

20,569

22,529

20,635

22,114

20,523

21,835

20,325

22,037

21,007

22,494

21,096

22,198

21,839

21,461

21,716

19,494

21,116

20,721

21,162

22,706

23,641

23,127

24,369

22,655

23,648

25,102

25,830

23,468

23,860

29,888

27,576

27,616

28,563

Government

337

303

545

323

316

504

556

469

406

495

845

611

578

611

687

666

689

809

547

480

315

395

533

848

917

645

648

770

734

850

839

744

942

881

978

1,266

2016

2017

2018

Source:BankofZambia

126

CommercialBa

nks'Loansa

ndAd

vances

-LocalCurrency

(K'M

illion),Dec

2016

-Dec

2018

Table7A

Aug-18

4,091

1,409

2,007

685

1,052

3,299

304

1,223

829

1,044

947 0

8,676

25,566

Sep-18

5,077

2,303

2,194

826

1,057

3,549

372

1,819

1,047

1,139

1,195 0

8,568

29,145

Oct-1

84,838

1,883

2,119

1,052

1,019

3,707

364

1,934

977

1,054

948 0

8,623

28,519

Nov-18

5,041

2,001

2,570

1,013

924

3,228

363

1,763

1,126

1,256

1,004 30

8,815

29,134

Jan-18

4,828

1,401

2,007

698

998

2,741

355

1,173

550

992

844 1

7,645

24,233

Feb-18

4,650

1,425

1,909

672

1,046

2,732

341

1,187

571

1,002

830 1

7,771

24,139

Mar-18

4,667

1,413

1,772

625

1,059

2,685

332

1,225

697

960

816 0

7,756

24,008

Apr-18

4,632

1,663

1,919

649

1,108

2,410

328

1,189

793

962

843 0

7,957

24,453

May-18

4,693

1,745

2,137

738

1,130

2,612

339

1,201

770

946

901 1

7,790

25,003

Jun-18

4,684

1,673

1,970

693

977

2,798

335

1,165

756

1,054

931 0

7,924

24,960

Jul-1

84,361

1,520

2,161

629

1,048

2,817

338

1,143

940

1,035

918 0

8,046

24,958

Dec-18

4,933

2,048

2,669

874

874

3,232

368

1,796

1,205

1,392

1,008 0

8,737

29,135

Source:BankofZambia

Dec-16

4,035

1,483

2,983

516

907

2,412

376

1,087

420

407

829 0

8,062

23,517

Sector

Agriculture,forestry,Fishing

andhunting

Miningandquarying

Manufacturing

Electricity,gas,waterandenergy

Construction

Wholesaleandretailtrade

Restaurantsand

hotels

Transport,storageandcommunications

Financialservices

Community,socialand

perconalservices

Realestate

Credit/debitcards

Othersectors

TOTA

LS

Dec-17

4,968

1,543

1,907

748

1,073

2,781

359

1,139

544

1,013

859 0

7,499

24,434

127

CommercialBa

nks'Loansa

ndAd

vances

-Foreign

Currency

(US$'00

0),Dec.201

6-D

ec.201

8Table7B

Aug-18

234,038

127,760

125,696

28,115

66,037

176,348

18,138

66,950

29,611

10,509

62,567

86,877

1,03

2,64

5

Sep-18

290,389

179,501

120,436

35,504

56,575

163,543

19,559

75,136

30,900

10,620

71,666

54,525

1,10

8,35

4

Oct-1

8283,410

150,953

120,040

56,015

55,762

167,177

20,014

80,207

31,883

9,092

54,412

54,924

1,08

3,88

9

Nov-18

300,572

159,560

141,147

52,524

48,075

134,170

20,216

73,605

34,119

6,442

57,251

51,977

1,08

2,14

2

Jan-18

290,089

131,645

113,628

26,745

56,688

134,343

25,505

66,883

15,200

7,851

57,926

64,328

990,831

Feb-18

284,877

134,698

111,131

27,449

64,836

137,495

24,615

64,255

14,840

7,859

57,181

66,297

995,53

5

Mar-18

286,666

137,577

109,345

26,092

68,029

136,421

24,395

62,262

25,693

8,184

56,915

66,310

1,00

7,88

9

Apr-18

280,431

156,810

111,309

31,767

69,778

104,849

22,508

60,719

26,053

11,194

56,519

65,011

996,94

8

May-18

283,399

157,341

121,430

31,212

67,234

113,495

22,047

62,453

27,322

12,462

60,876

49,332

1,00

8,60

4

Jun-18

290,514

157,512

110,032

28,263

52,944

125,849

21,967

63,015

27,285

9,451

65,792

53,534

1,00

6,15

7

Jul-1

8268,464

141,484

122,860

28,757

60,391

134,395

22,191

62,769

31,188

10,445

63,285

54,375

1,00

0,60

5

Dec-18

294,386

162,736

147,387

53,790

47,960

133,433

19,661

73,785

33,650

8,540

58,079

48,563

1,08

1,97

1Source:BankofZambia

Dec-16

236,845

138,696

108,383

12,137

44,867

78,271

27,203

55,406

7,479

9,011

57,979

49,796

826,07

3

Sector

Agriculture,forestry,Fishing

andhunting

Miningandquarying

Manufacturing

Electricity,gas,waterandenergy

Construction

Wholesaleandretailtrade

Restaurantsand

hotels

Transport,storageandcommunications

Financialservices

Community,socialand

perconalservices

Realestate

Othersectors

TOTA

LS

Dec-17

288,809

143,992

92,005

36,620

63,602

133,201

25,671

63,593

16,154

7,723

58,773

68,851

998,99

4

128

Savings

4.3

4.3

3.6

3.4

3.3

3.1

2.8

2.7

2.7

2.8

2.7

2.6

2.6

2.7

2.8

2.7

2.8

2.8

2.8

2.8

2.8

2.8

2.8

3.0

3.0

3.0

3.0

3.0

3.0

3.0

Treasurybillrates

Governmentbondrates

StructureofInterestRa

tes(Percentp

erYear),De

c201

1-D

ec20

18Table8

3year

15.1

12.8

15.5

16.2

23.5

23.2

23.2

22.4

20.0

20.0

20.0

19.6

17.9

17.9

16.9

16.9

18.5

18.3

18.0

18.0

17.9

17.9

17.9

18.0

18.5

18.5

18.4

19.0

20.0

20.0

5year

15.4

13.5

16.5

22.4

28.0

25.0

25.0

23.6

19.5

19.4

19.3

18.9

17.5

17.5

17.7

17.7

18.0

18.0

18.0

18.0

17.9

17.9

17.9

18.3

20.0

20.2

20.4

20.4

20.4

20.4

7year

15.0

14.5

16.9

21.5

28.0

24.8

24.8

23.8

20.9

20.7

20.0

19.7

18.5

18.5

16.0

16.0

19.5

19.5

19.5

19.5

19.0

19.0

19.0

19.0

19.0

19.0

19.0

18.8

18.5

18.5

10year

15.9

16.5

18.2

22.0

20.0

25.0

25.0

23.7

20.0

19.9

19.9

19.6

18.3

18.3

18.0

18.0

21.0

20.6

20.0

20.0

20.0

19.8

19.0

19.1

19.3

19.6

19.9

19.8

19.5

21.5

91days 7.0

9.4

8.0

13.0

15.0

20.5

20.4

17.9

14.8

14.0

14.2

13.1

12.2

11.2 9.1

9.0

9.1

9.5

9.8

9.9

10.0

10.1

10.0

10.0

10.0

11.8

13.6

14.2

14.5

15.0

182days 9.5

12.4

14.8

17.5

20.3

23.9

23.9

20.6

15.9

14.7

15.3

13.7

12.0

11.0 9.2

9.6

9.5

9.8

10.0

10.3

11.0

11.2

12.6

13.1

13.8

14.7

15.2

15.0

14.6

14.8

273days

11.4

11.4

15.0

18.0

18.7

25.0

24.7

20.7

16.6

15.3

15.9

14.1

12.0

10.3 9.1

11.3

14.0

13.6

13.0

10.2 8.5

12.1

12.9

13.0

13.0

16.3

18.3

19.9

21.1

21.0

364days

13.5

12.1

15.7

20.4

21.5

25.0

24.7

22.1

18.9

17.2

17.5

15.6

16.7

16.4

15.2

15.7

15.8

16.3

16.5

16.3

17.3

17.5

17.7

17.9

18.4

19.1

20.4

21.9

23.0

23.1

24mon

ths

14.7

11.0

14.0

15.0

23.0

25.0

25.0

23.8

20.0

20.0

20.0

19.4

17.0

17.0

16.0

16.0

16.5

16.5

16.5

16.5

16.4

16.4

16.4

16.8

18.5

18.9

19.4

19.5

19.5

19.5

15year

16.2

16.6

18.0

22.5

22.5

25.0

25.0

24.5

23.0

22.8

22.5

21.9

19.5

19.5

18.5

18.5

18.5

18.5

18.5

18.5

18.5

18.5

18.5

18.3

17.5

17.5

17.5

17.5

17.5

17.3

Source:Bank

ofZambia

1 FiguresbeforeApril2012re�lecttheCommercialBanks'weightedLendingBaseRatewhile�iguresafterthatindicatesBoZPolicyrate.

2 PenaltyRates:TheseareratesappliedwhenaBank

fallsshortonStatutoryReserveRatios.

90day

5.3

5.3

6.6

9.1

9.2

10.8

10.9

11.2

10.5

10.4

10.1 8.7

8.6

8.0

7.4

6.9

6.7

6.9

6.7

6.9

6.7

6.6

6.6

6.5

6.6

6.6

6.8

6.9

7.2

7.6

Commercia

lbankrate

Endofperiod

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Weighted

Interbank

rate

10.2 8.8

9.9

12.0

26.1

16.2

15.9

15.3

14.1

13.0

13.9

12.9

12.3

12.0

10.5

10.5

11.0

10.1

10.1

10.3 9.6

9.1

9.7

9.9

9.9

10.0

10.0 9.8

9.8

9.8

Penalty

2rate

35.5

33.2

36.4

39.5

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

39.8

BoZ1

PolicyRa

te16.6 9.3

9.8

12.5

15.5

15.5

15.5

14.0

14.0

14.0

12.5

12.5

12.5

11.0

11.0

11.0

10.3

10.3

10.3 9.8

9.8

9.8

9.8

9.8

9.8

9.8

9.8

9.8

9.8

9.8

2011

2012

2013

2014

2015

2016

2017

2018

129

CommercialBa

nkInterestRa

tes(PercentP

erYear),De

c201

0-D

ec20

18Table9

60day

7.4

6.8

6.8

6.1

8.3

7.9

9.4

9.8

10.7

11.6

11.2

10.8

10.7

10.9

10.3

10.4

10.7

10.4

10.3

10.6 9.5

9.3

9.3

8.4

8.4

7.7

6.8

6.2

6.0

6.2

5.9

6.1

6.0

6.0

5.8

6.1

6.0

5.8

6.0

6.0

6.2

6.6

90day

7.4

7.0

7.0

6.6

9.1

9.2

9.8

9.9

10.9

11.9

11.3

10.9

11.0

10.6

10.6

10.9

10.8

10.8

10.9

11.2

10.5

10.4

10.1 8.7

8.6

8.0

7.4

6.9

6.7

6.9

6.7

6.9

6.7

6.6

6.6

6.5

6.6

6.6

6.8

6.9

7.2

7.6

EndofPeriod

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Weighted

interbankrate 6.2

10.2 8.8

10.1

12.0

26.1

26.4

27.0

27.2

27.3

20.7

17.7

17.8

18.2

17.6

16.7

16.5

16.2

15.9

15.3

14.1

13.0

13.9

12.9

12.3

12.0

10.5

10.5

11.0

10.1

10.1

10.3 9.6

9.1

9.7

9.9

9.9

10.0

10.0 9.8

9.8

9.8

lessthan

K100 3.6

3.7

3.8

2.8

2.4

2.5

2.6

2.6

2.6

2.7

2.5

2.6

2.6

2.4

2.5

2.8

2.8

2.4

2.0

1.9

2.0

2.0

2.0

1.9

2.0

2.0

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

morethan

K100 4.7

4.3

4.3

3.5

3.3

3.3

3.5

3.3

3.3

7.5

3.2

3.3

3.2

3.0

3.2

3.4

3.4

3.1

2.8

2.7

2.7

2.8

2.7

2.6

2.6

2.7

2.8

2.7

2.8

2.8

2.8

2.8

2.8

2.8

2.8

3.0

3.0

3.0

3.0

3.0

3.0

3.0

24hrcall

2.9

2.7

2.7

1.9

2.0

1.9

2.0

2.0

2.3

2.4

2.2

2.3

2.2

2.3

2.3

2.5

2.5

2.4

2.3

2.4

2.2

2.0

2.0

2.1

2.2

2.2

2.1

1.8

1.9

2.0

2.0

2.2

2.2

2.2

2.2

2.3

2.3

2.3

2.3

2.3

2.3

2.3

7day

3.5

3.5

3.5

3.0

4.2

4.0

6.1

6.5

8.6

8.5

6.9

7.0

7.0

6.8

6.2

6.4

6.6

6.3

6.1

6.1

5.1

4.8

5.1

4.6

4.8

4.8

4.9

4.0

3.8

3.3

3.4

3.7

3.9

3.8

3.5

3.6

3.6

3.6

3.6

3.4

3.5

3.5

14day

4.0

4.0

4.0

4.1

4.3

4.2

6.6

6.5

8.6

8.8

7.2

7.6

7.7

7.4

6.7

7.0

7.0

6.7

6.6

6.6

5.2

5.5

5.9

4.5

4.5

4.8

5.2

4.1

4.4

3.5

3.0

3.5

3.3

3.3

3.3

3.4

3.5

3.5

3.5

3.3

3.3

3.3

30day

5.6

5.3

5.3

5.1

6.8

7.2

7.8

8.6

9.1

10.0 9.3

9.4

9.3

9.2

8.4

8.5

9.1

8.7

8.3

8.6

7.6

8.0

8.3

7.2

7.3

6.9

6.2

5.7

6.0

5.5

4.9

5.3

5.1

5.1

5.1

5.2

5.2

5.6

5.4

5.3

5.1

5.3

Average

LendingRates

26.4

24.0

16.1

16.4

20.5

25.8

25.8

26.0

26.5

27.5

28.0

28.6

29.0

28.8

28.9

28.7

29.4

29.5

29.2

28.9

28.8

28.2

27.7

26.6

26.3

26.6

25.4

25.4

25.5

24.6

24.5

24.3

24.1

24.1

23.9

24.1

23.7

23.5

23.0

24.4

24.0

23.6

SavingsR

ates

Depositso

verK

20,000

Source:BankofZambia

180day

7.6

6.8

6.8

8.4

10.5

10.8

11.0

11.5

12.7

13.1

13.1

12.9

13.0

13.3

12.6

12.5

12.7

12.7

12.9

12.5

11.6

11.5

11.7

11.0

10.4 9.8

9.4

8.8

8.6

8.6

8.3

8.3

8.1

8.0

8.0

8.1

8.2

8.2

8.3

8.5

8.6

9.1

2010

2011

2012

2013

2014

2015

2016

2017

2018

130

Bank

ofZambia

Bureau

Rates

Kwacha/U

SDo

llarE

xchangeRa

tes,De

c201

1-D

ec20

18Table10

Period

Mon

thlyAverage

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Selling

5,127.3

5,229.0

5.5

6.3

10.8 9.9

9.9

9.8

9.6

9.5

9.3

9.3

9.0

9.0

9.4

9.8

10.1

10.1 9.9

9.8

9.6

9.5

10.1

10.1 9.9

10.1

10.9

11.9

11.9

11.9

Mid

5,117.3

5,208.5

5.5

6.3

10.8 9.8

9.9

9.8

9.6

9.4

9.3

9.3

8.9

9.0

9.4

9.8

10.0

10.0 9.9

9.8

9.6

9.5

10.1

10.0 9.9

10.1

10.9

11.9

11.8

11.9

Buying

5,068.7

5,243.3

5.1

6.3

10.6 9.8

9.9

9.8

9.6

9.5

9.3

9.2

9.0

9.0

9.3

9.7

10.0

10.0 9.8

9.8

9.7

9.5

10.0

10.0 9.8

10.0

10.6

11.9

11.7

11.8

Selling

5,153.5

5,323.6

5.1

6.4

10.8

10.0

10.0

10.0 9.8

9.7

9.4

9.4

9.1

9.1

9.5

9.8

10.1

10.2

10.0 9.9

9.8

9.6

10.1

10.2

10.0

10.2

10.7

12.1

11.9

12.0

Mid

5,111.1

5,283.5

5.1

6.4

10.7 9.9

10.0 9.9

9.7

9.6

9.2

9.3

9.0

9.0

9.4

9.8

10.0

10.1 9.9

9.8

9.7

9.6

10.1

10.1 9.9

10.1

10.7

11.6

11.8

11.8

2011

2012

2013

2014

2015

2016

2017

2018

Buying

5,107.3

5,198.5

5.5

6.3

10.8 9.8

9.9

9.7

9.6

9.4

9.2

9.2

8.9

9.0

9.4

9.7

10.0

10.0 9.8

9.8

9.6

9.5

10.1

10.0 9.9

10.1

10.9

11.9

11.8

11.9

Source:BankofZam

bia

Note:InJuly2003,theBank

ofZambiaestablishedabroad-basedforeignexchangetradingsystem

asthenewmechanism

fordeterminingtheexchangerateinZambia.ThisimpliesthatBankofZambiaceasedtoauctionforeignexchangetothemarketonbehalfofmajorforeignexchangeearners.Foreignexchangeearnerscan

nowtransactdirectlywith

commercialbanksoftheirchoice.

*Effective1stJanuary,2013theZambian

Kwacha

wasrebasedby

K1000.

131

CommercialBa

nksF

oreign

Exchange

Rates,Jan20

16-D

ec20

18Table11

Buying

11.1

11.3

11.3 9.7

10.0

10.7 9.9

10.0

10.0 9.9

9.8

9.8

9.9

9.7

9.6

9.4

9.2

9.2

8.9

9.0

9.4

9.7

10.0

10.0 9.8

9.8

9.6

9.5

10.1

10.0 9.9

10.1

10.9

11.9

11.8

11.9

Selling

11.1

11.3

11.4 9.8

10.1

10.7 9.9

10.0

10.0 9.9

9.8

9.9

10.0 9.8

9.6

9.5

9.3

9.3

9.0

9.0

9.4

9.8

10.1

10.1 9.9

9.8

9.6

9.5

10.1

10.1 9.9

10.1

11.0

11.9

11.9

11.9

Mid-rate

11.1

11.3

11.3 9.7

10.1

10.7 9.9

10.0

10.0 9.9

9.8

9.8

9.9

9.8

9.6

9.4

9.3

9.3

8.9

9.0

9.4

9.8

10.0

10.0 9.9

9.8

9.6

9.5

10.4

10.0 9.9

10.1

11.1

11.9

11.8

11.9

Buying

16.0

16.2

16.1

13.9

14.6

15.2

13.0

13.1

13.1

12.2

12.2

12.3

12.2

12.1

11.8

11.9

11.9

11.8

11.6

11.7

12.5

12.9

13.2

13.4

13.6

13.6

13.4

13.4

13.6

13.3

13.0

13.0

14.3

15.5

15.2

15.1

Mid-rate

16.0

16.2

16.1

13.9

14.6

15.2

13.0

13.1

13.1

12.2

12.2

12.3

12.2

12.2

11.9

11.9

12.0

11.8

11.6

11.7

12.5

12.9

13.3

13.4

13.6

13.7

13.4

13.4

13.6

13.3

13.0

13.0

14.3

15.5

15.3

15.1

Buying

12.1

12.6

12.6

11.0

11.3

12.0

11.1

11.2

11.2

10.9

10.6

10.4

10.5

10.4

10.2

10.1

10.2

10.3

10.3

10.6

11.2

11.4

11.8

11.8

12.0

12.1

11.8

11.7

11.9

11.7

11.5

11.6

12.7

13.7

13.4

13.5

Selling

12.1

12.6

12.6

11.1

11.4

12.1

11.2

11.3

11.2

10.9

10.6

10.4

10.6

10.4

10.3

10.1

10.2

10.4

10.3

10.7

11.2

11.5

11.8

11.9

12.1

12.1

11.9

11.7

12.0

11.8

11.6

11.7

12.8

13.7

13.5

13.7

Mid-rate

12.1

12.6

12.6

11.1

11.4

12.0

11.2

11.2

11.2

10.9

10.6

10.4

10.6

10.4

10.3

10.1

10.2

10.4

10.3

10.7

11.2

11.5

11.8

11.9

12.0

12.1

11.8

11.7

11.9

11.7

11.6

11.6

12.8

13.7

13.5

13.6

Buying 0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.7

0.7

0.7

0.8

0.8

0.8

Selling

16.0

16.2

16.2

14.0

14.6

15.3

13.1

13.2

13.1

12.2

12.2

12.3

12.3

12.2

11.9

12.0

12.0

11.8

11.6

11.7

12.6

12.9

13.3

13.5

13.7

13.7

13.4

13.4

13.7

13.4

13.1

13.0

14.3

15.5

15.3

15.1

Selling 0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.7

0.7

0.7

0.8

0.8

0.8

INTERB

ANKUS

$UK

Pound

EURO

SAR

Mid-rate

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.7

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.7

0.7

0.7

0.8

0.8

0.8

Source:BankofZambia

Date

Mon

thlyAvg.

2016

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2017

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2018

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Buying

11.1

11.3

11.4 9.8

10.0

10.6 9.8

9.9

9.9

9.8

9.7

9.3

9.8

9.7

9.5

9.4

9.2

9.2

8.9

9.0

9.3

9.7

10.0 9.9

9.8

9.7

9.5

9.4

10.0

10.0 9.8

10.0

10.8

11.9

11.7

11.8

Mid-rate

11.2

11.3

11.4 9.8

10.0

10.7 9.9

10.0 9.9

9.9

9.8

9.6

9.9

9.8

9.6

9.5

9.3

9.3

8.9

9.0

9.4

9.8

10.1

10.0 9.9

9.8

9.6

9.5

10.1

10.0 9.9

10.1

10.9

11.9

11.8

11.9

Selling

11.2

11.4

11.3 9.8

10.1

10.7 9.9

10.1

10.0 9.9

9.9

9.8

10.0 9.8

9.6

9.5

9.3

9.3

9.0

9.0

9.4

9.8

10.1

10.1 9.9

9.8

9.6

9.6

10.1

10.1 9.9

10.1

11.0

11.9

11.9

12.0

Selling

11.2

11.4

11.3 9.7

10.1

10.8 9.9

10.0

10.0 9.9

9.9

9.9

10.0 9.8

9.7

9.5

9.3

9.3

9.0

9.1

9.5

9.9

10.2

10.1 9.9

9.9

9.7

9.6

10.2

10.1

10.0

10.2

11.0

12.0

11.9

12.0

NonBanksU

S$BureauxUS

$

132

ForeignExchange

Transactions

(US$Million),Dec

2010

-Dec

2018

Table12

Other

Non-GR

Z54.0

40.4

45.6

39.7

40.1

60.6

41.3

64.1

47.4

45.8

48.0

104.9

41.6

44.3

25.2

39.4

40.4

69.4

48.5

27.5

37.3

74.7

23.7

43.3

34.6

18.1

30.9

21.6

26.2

55.3

38.6

30.7

25.9

34.0

50.3

35.7

57.4

20.8

47.8

48.5

52.2

44.8

Dono

rInflo

ws

103.4

28.3

74.2

20.0 4.0

24.5 9.0

11.6 1.1

12.5 4.6

8.7

4.7

2.7

22.2 7.6

7.9

12.8

11.6 8.5

12.6 1.0

10.7

17.9 2.6

13.6 6.7

6.7

4.0

14.4 8.2

9.1

6.7

13.0

17.4

23.9 9.7

7.4

2.3

5.4

2.5

8.5

Dealing

11.0 0.0

171.0

46.0 0.0

50.0

41.2

71.2

95.0

36.4

-82.8

-27.0

-41.0

72.5

23.0

22.5

118.2

57.3

-24.0

8.9

7.1

118.0

-45.5

-25.0

-110.5

-4.0

30.0

-31.0

0.0

115.6

4.0

-10.0

-20.0

-114.0 0.0

-52.0

-52.0

-38.0

0.0

-29.0

0.0

0.0

Other

Non-GR

Z24.8

92.8

12.3

23.1

44.9

49.8

57.4

32.0

56.1

32.3

54.7

104.2

33.5

21.4

17.9

59.5

38.4

46.1

36.1

40.7

50.5

23.9

-70.0

35.8

65.5

64.9

30.4

44.3

33.4

20.2 9.8

78.9

28.2

23.2

58.7

26.3

11.6

22.8

21.0

17.2

17.0

11.5

GRZDe

btServicing

43.9 3.2

18.4

25.3 4.6

25.5 8.7

102.1

53.6

-67.5

-26.9

36.2

41.3

75.7

33.0

81.0

-28.9

28.3

79.8

33.8

65.1

65.9

36.3

25.1

125.6

20.4

66.5

96.1

46.2

46.1

160.7

18.8

117.6

153.3

36.3

41.3

151.1

85.7 1.6

90.2

27.6

74.9

GRZ

OtherU

ses

99.9

134.3

191.5

0.1

1.5

50.0

17.0 4.8

25.9 0.0

-0.5 0.0

107.1

2.7

3.4

2.9

-0.5 7.8

23.8 0.4

-92.5

1.1

8.2

8.6

16.2 6.1

26.2

11.6 1.7

1.5

58.0 0.0

-20.0

-6.1 0.4

2.4

0.7

3.5

9.5

7.4

0.7

2.6

Gross

International

Reserves

2118.7

2347.0

3069.0

2708.8

3103.2

2973.4

2902.6

2773.8

2598.8

2569.0

2457.2

2403.8

2228.3

2247.7

2264.4

2198.2

2300.4

2366.0

2310.5

2262.6

2282.4

2403.9

2369.4

2386.1

2326.6

2271.0

2155.4

2014.2

1965.2

2092.5

1915.6

1867.8

1787.9

1778.5

1750.9

1816.0

1770.9

1725.5

1630.6

1598.6

1608.0

1569.2

Bank

ofZambiaInflows

Bank

ofZambiaO

utflo

ws

Source:BankofZambia

Period

2010

2011

2012

2013

2014

2015

2016

2017

2018

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Mines 0.0

0.0

0.0

0.0

0.9

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

9.7

0.0

0.0

0.0

0.0

0.0

23.3 0.0

0.0

0.0

0.0

0.0

0.0

133

Percentage

ChangesintheConsum

erPriceIndices(

2009

weights-B

ase20

09=10

0),Jan

2016

-Dec

2018

Table13

Non

Food

179.7

181.8

181.9

181.4

181.8

183.6

183.5

184.9

183.6

185.3

189.6

190.8

191.6

192.9

193.8

194.9

195.1

198.4

198.4

198.5

200.1

200.6

201.7

205.1

207.1

208.1

210.8

211.4

212.4

212.8

213.4

214.0

214.6

217.3

219.1

220.7

Total

21.8

22.9

22.2

21.8

21.3

21.0

20.2

19.6

18.9

12.5 8.8

7.5

7.0

6.8

6.7

6.7

6.5

6.8

6.6

6.3

6.6

6.4

6.3

6.1

6.2

6.1

7.1

7.4

7.8

7.4

7.8

8.1

7.9

8.3

7.8

7.9

Food

25.9

26.4

26.2

26.5

25.8

25.3

24.8

24.1

23.4

15.6 9.2

7.8

7.4

7.4

6.7

6.1

5.9

5.8

5.3

5.1

5.0

4.9

4.8

4.8

4.6

4.6

5.8

6.5

6.9

7.5

8.1

8.3

8.6

8.3

8.4

8.1

Non

Food

17.4

19.1

17.9

16.7

16.5

16.5

15.3

14.8

14.0 9.0

8.3

7.1

6.7

6.1

6.6

7.5

7.3

8.0

8.1

7.7

8.4

8.2

7.9

7.5

8.1

7.9

8.7

8.4

8.9

7.3

7.6

7.8

7.3

8.3

7.0

7.6

Total

1.3

1.2

0.5

0.3

0.2

0.3

0.1

0.4

0.1

0.5

1.5

0.9

0.9

1.0

0.3

0.4

0.1

0.6

-0.1 0.1

0.3

0.4

1.4

0.7

1.0

0.9

1.3

0.6

0.4

0.2

0.3

0.3

0.2

0.7

0.9

0.8

Food 1.6

1.2

0.9

0.8

0.2

-0.2 0.2

0.3

0.0

0.6

0.8

1.1

1.2

1.2

0.2

0.2

0.1

-0.3

-0.2 0.1

-0.1 0.5

0.8

1.1

1.0

1.2

1.4

0.9

0.4

0.3

0.3

0.3

0.1

0.3

1.0

0.8

Non

Food 0.9

1.2

0.0

-0.3 0.3

1.0

-0.1 0.4

0.2

0.4

2.3

0.6

0.5

0.7

0.5

0.6

0.1

1.7

0.0

0.1

0.8

0.2

2.0

0.2

1.0

0.5

1.3

0.3

0.5

0.2

0.3

0.3

0.3

1.2

0.8

0.7

Consum

erPrice

sFood

andNo

n–Food

(2009=100)

AnnualInflatio

nMonthon

MonthInflatio

nRates

Source:CentralStatisticalOf�ice

Monthly

2016

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2017

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2018

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Total

178.7

180.8

181.7

182.2

182.7

183.3

183.4

184.1

184.2

185.2

188.0

189.6

191.3

193.1

193.8

194.5

194.6

195.8

195.6

195.8

196.3

197.1

199.8

201.2

203.2

204.9

207.6

208.9

209.8

210.4

210.9

211.5

211.9

213.4

215.4

217.0

Food

177.9

179.9

181.5

183.0

183.4

183.0

183.4

183.9

183.9

185.0

186.6

188.7

191.0

193.3

193.7

194.1

194.2

193.6

193.1

193.3

193.1

194.1

195.6

197.8

199.7

202.1

204.9

206.8

207.6

208.2

208.8

209.4

209.6

210.1

212.1

213.8

134

Treasury

BillTransactions

(K'M

illion),D

ec20

10-D

ec20

18Table14

Settlement

value

644,989.3

638,117.7

0.0

1,552,661.7

871,680.8

146,913.0

616,185.6

1,084,406.1

604,678.2

570,064.6

859,766.8

1,044,692.7

953,106.3

901,937.5

1,152,621.5

1,528,467.0

1,215,654.9

2,077,945.7

1,837,622.7

2,159,509.3

2,112,458.2

1,742,471.3

738,772.3

2,979,719.3

1,321,605.1

1,054,921.1

922,782.0

1,646,903.5

1,584,558.5

1,581,365.6

1,661,610.1

1,839,472.4

2,646,418.3

521,988.8

715,567.3

611,701.3

879,354.3

2,072,389.4

1,857,294.3

772,896.7

1,133,815.7

2,089,999.5

Maturite

s424,009.0

471,047.0

0.0

548,794.7

710,943.0

969,945.0

903,555.0

812,670.0

1,502,825.0

728,489.0

886,515.0

841,216.0

714,125.6

1,143,693.0

991,192.0

1,088,396.0

542,342.0

762,489.0

807,822.0

751,300.0

481,912.0

453,993.0

759,287.2

1,264,552.0

821,541.0

1,485,092.6

1,833,582.1

2,140,055.4

919,390.0

1,229,304.0

993,434.0

1,663,733.0

2,453,238.0

212,511.0

875,205.0

1,340,161.0

1,315,992.0

2,575,221.0

2,054,640.0

810,990.0

1,078,740.5

335,975.0

SpecialTaps&

Off-TenderS

ales 0.0

0.0

0.0

15,850.5 0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Re-discoun

ts 0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

91Da

ys108,714.0

87,065.0

53,037.0

16,400.0

144,610.0

11,265.0

14,570.0

14,161.0

10,961.0

49,326.0

100,855.0

97,344.0

105,936.0

56,809.0

161,502.0

84,522.0

99,040.0

291,690.0

197,405.0

143,165.0

92,442.0

45,194.0

112,580.0

164,026.4

64,806.0

139,464.0

39,696.0

136,537.0

26,756.0

125,831.0

41,940.0

116,679.0

286,681.0

16,554.0

18,726.0

54,025.0

26,680.0

168,568.0

109,311.0

133,470.0

65,916.0

208,102.0

273

Days

134,845.0

164,723.0

172,174.5

318,190.0

102,920.0

179,295.0

40,200.0

169,828.3

223,300.0

125,250.0

245,036.3

345,159.0

195,921.0

226,592.0

383,550.0

285,010.0

441,495.0

555,388.8

474,614.0

613,470.0

400,940.0

453,023.0

174,850.0

613,557.0

24,345.0

112,331.0

108,578.0

127,295.0

382,720.0

305,845.0

146,030.0

1,685.0

111,215.0

4,530.0

0.0

12,725.0

150.0

622,880.0

262,770.0

159,545.0

73,150.0

408,240.0

364Da

ys306,995.0

335,239.0

374,891.7

923,695.0

579,915.0

261,361.0

696,939.0

545,759.0

341,339.0

312,935.0

486,265.2

474,765.0

514,073.0

592,222.0

687,275.0

1,351,360.0

631,100.0

1,128,459.0

865,335.0

1,483,220.0

1,711,343.0

1,230,781.0

337,081.0

1,862,731.0

1,302,000.0

1,432,592.0

1,937,890.0

1,601,195.0

1,279,436.0

1,270,172.0

1,716,550.0

1,906,099.0

2,301,762.0

524,666.0

744,850.0

640,510.0

973,305.0

1,255,727.0

1,657,132.5

615,625.0

906,372.0

1,504,949.6

TotalSales

682,400.0

697,042.0

767,399.2

1,742,990.0

1,000,598.0

564,873.0

775,027.0

756,382.4

736,497.0

683,613.0

1,023,734.5

1,233,460.0

1,115,583.0

1,081,164.0

1,372,900.0

1,861,950.0

1,444,657.0

2,455,798.8

2,154,348.0

2,538,786.0

2,440,232.0

1,988,292.0

825,485.0

3,336,956.4

1,519,250.0

1,864,900.0

2,094,814.0

1,901,843.0

1,801,852.0

1,797,278.0

1,918,512.0

2,112,457.0

3,022,353.0

604,235.0

831,912.0

712,264.0

1,033,315.0

2,380,618.0

2,192,663.5

911,805.0

1,047,108.0

2,339,177.6

182Da

ys131,846.0

110,015.0

167,296.0

484,705.0

173,153.0

112,952.0

23,318.0

26,634.0

160,897.0

196,102.0

191,578.0

316,192.0

299,653.0

205,541.0

140,573.0

141,058.0

273,022.0

480,261.0

616,994.0

298,931.0

235,507.0

259,294.0

200,974.0

696,642.0

128,099.0

180,513.0

8,650.0

36,816.0

112,940.0

95,430.0

13,992.0

87,994.0

322,695.0

58,485.0

68,336.0

5,004.0

33,180.0

333,443.0

163,450.0

3,165.0

1,670.0

217,886.0

TreasuryBillsTenderSales

Total

Outstand

ingBills

4,533,570.6

6,919,518.1

6,840,829.8

9,525,976.4

10,809,484.4

12,090,096.5

11,872,902.5

11,886,036.5

11,997,811.5

10,687,467.5

10,600,726.0

10,591,229.0

10,653,007.0

10,464,391.0

10,492,372.0

11,196,878.0

11,843,924.0

13,174,213.5

14,830,489.5

16,262,283.2

17,430,754.2

18,907,705.2

18,604,146.0

19,812,521.0

19,879,295.0

20,585,010.0

21,053,482.0

19,452,167.6

19,968,004.2

20,193,512.4

20,545,806.4

20,781,399.4

20,287,537.4

20,458,237.4

20,278,566.4

19,221,162.4

18,694,672.4

18,273,947.4

17,469,018.4

17,794,641.9

17,466,105.9

17,515,488.9

Source:Bank

ofZambia

Period

December

December

December

December

December

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

2010

2011

2012

2013

2014

2015

2016

2017

2018

135

ByHo

lder

GRZBo

ndsO

utstanding

(K'M

illion),Jan.201

6-D

ec.201

815

Table

Others

1

7,424,906.7

7,507,726.2

7,411,945.9

7,258,030.8

7,844,070.2

8,129,239.9

7,341,118.1

8,223,115.1

8,175,996.1

8,149,636.6

9,603,869.3

10,466,890.2

10,639,719.1

11,383,057.6

11,279,983.0

12,807,990.3

12,221,336.4

11,475,268.2

13,477,026.7

12,595,094.5

12,643,645.5

15,352,280.0

15,352,282.0

14,657,981.0

14,631,714.6

15,397,339.3

15,875,788.8

16,719,096.4

16,645,868.7

16,501,970.0

17,606,078.4

20,016,417.2

21,195,494.4

21,938,157.1

22,629,960.1

23,317,926.3

Commercialbank

s1,566,673.7

1,541,693.9

1,583,399.9

1,658,141.6

1,911,750.3

1,907,902.9

1,879,579.9

2,044,064.4

1,971,061.2

1,944,347.7

2,275,544.8

2,554,542.6

2,525,606.0

3,008,189.2

3,048,046.2

3,224,990.9

2,889,612.5

3,092,957.6

3,211,202.4

3,109,866.3

3,787,869.9

4,243,043.8

4,103,870.9

4,760,033.9

4,791,696.3

5,489,952.4

5,011,501.9

5,839,548.7

5,785,925.0

5,929,823.7

6,283,361.5

6,289,002.4

5,943,013.1

5,939,325.8

5,955,483.5

5,886,095.6

TotalO

utstanding

8,991,580.4

9,049,420.1

8,995,345.8

8,916,172.4

9,755,820.5

10,037,142.8

9,220,698.0

10,267,179.5

10,147,057.2

10,093,984.3

11,879,414.1

13,021,432.8

13,165,325.0

14,391,246.8

14,328,029.2

16,032,981.2

15,110,948.9

14,568,225.8

16,688,229.1

15,704,960.8

16,431,515.4

19,595,323.8

19,456,152.9

19,418,014.9

19,423,410.9

20,887,291.7

20,887,290.7

22,558,645.2

22,431,793.6

22,431,793.7

23,889,439.9

26,305,419.6

27,138,507.6

27,877,482.9

28,585,443.6

29,204,021.9

Source:Bank

ofZambia

Note:(1)O

thersincludesB

oZandNon-bankholdingsofGRZordinaryBonds

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Endofperiod

2016

2017

2018

136

Productio

n8,648.0

7,701.6

5,434.9

5,919.4

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Copper

Cobalt

MetalProductio

nandExports(M

etricT

onnes),201

0-201

8Table16

Productio

n852,566.3

833,449.7

824,976.6

997,822.8

708,259.4

710,860.2

64,181.0

55,649.7

63,323.9

59,611.5

61,073.8

69,536.8

70,500.5

65,852.4

65,052.1

61,738.9

68,381.9

63,546.5

768,44

9.0

57,157.1

53,390.1

56,100.0

66,267.4

61,510.4

69,237.8

70,419.2

71,023.0

66,917.8

72,740.8

68,717.1

73,250.7

786,73

1.4

65,670.4

64,022.1

70,336.7

63,657.5

69,861.7

77,370.5

76,444.2

69,734.9

73,951.5

77,359.3

69,783.2

72,896.8

851,08

8.9

Exports

829,727.8

832,215.6

903,137.4

976,305.7

1,146,315.4

1,022,096.5

88,014.7

73,222.4

72,106.6

66,804.0

82,730.1

83,612.0

80,496.9

65,908.3

67,593.1

86,452.1

79,906.1

80,105.1

926,95

1.4

84,484.8

87,125.1

88,066.1

87,307.1

82,402.0

83,718.9

78,604.2

86,819.7

61,997.8

77,712.7

101,154.0

100,030.6

1,01

9,42

3.0

100,002.8

86,752.2

85,351.4

78,660.2

80,640.4

94,473.8

91,126.1

97,572.5

86,654.2

77,759.4

79,631.0

78,746.7

1,03

7,37

0.7

Exports

8,640.9

7,830.7

10,029.3

5,880.8

4,562.2

2,978.8

374.0

196.8

560.3

642.7

376.6

288.6

237.7

408.5

494.9

714.5

472.4

509.0

5,27

6.1

366.9

231.0

230.0

132.0

225.0

129.0

265.0

264.0

197.0

211.0

198.0

200.0

2,64

8.9

165.0

132.0

100.0

99.0

198.0

165.0

165.0

132.0

132.0

66.0

99.0

132.0

1,58

5.0

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Total

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Total

January

February

March

April

May

June

July

August

Septem

ber

October

Novem

ber

December

Total

Source:BankofZambiaandCentralStatisticalOffice

n/anotavailable

Endofperio

d

2010

2011

2012

2013

2014

2015

2016

2017

2018

P t - Bank of Zambia · experiencein resou rcesandpeoplemanagemen t.Hehasb road internationalexposu...

Documents

Transcript of P t - Bank of Zambia · experiencein resou rcesandpeoplemanagemen t.Hehasb road internationalexposu...