The overall financial condition and performance of the Non Bank Financial Institutions (NBFI) sector was rated fair during the quarter under review. The sector was adequately capitalised with “fair” asset quality while earnings and liquidity performance were also rated “fair”. However, the leasing subsector reported regulatory capital deficiencies. During the quarter under review, the FinScope 2009 Consumer Survey report was launched to the public in Lusaka and Ndola. The survey findings indicated that agricultural activities still remained a major source of income for most Zambians yet the sector was largely underserved. Overall, there was a marginal increase of 3.6 percentage points in financial access to 37.3% in 2009 from 33.7% in 2005. Developments in banking, currency and payment systems During the quarter, there was a continued improvement in the availability of electronic payment options. The number of Point of Sale (POS) terminals increased by 3.8% to 1,033 terminals (Quarter 2 2010: 995). The volume of POS transactions also increased by 15% to 199,817 (Quarter 2 2010: 173,606) while the values increased by 13% to K86 billion (Quarter 2 2010: K76 billion). The number of Automated Teller Machines (ATMs) increased by 4% to 468 ATMs (Quarter 2 2010: 450). The volume of ATM transactions also increased by 11% to 6,333,073 (Quarter 2 2010: 5,697,122). The Bank would like to continue urging the public to use electronic payment methods as they provide a more convenient, safer, efficient and effective way of making payments.
Introduction This brief examines monetary policy implementation and its outcomes in the third quarter of 2010. The brief also reviews other economic and financial sector developments. In the conclusion, it provides an inflation outlook for the fourth quarter of 2010. Monetary policy The focus of monetary policy during the third quarter of 2010 continued to be the achievement of the end-year annual inflation target of 8.0%. Consistent with this inflation outturn, annual overall inflation was programmed at 7.3% for end-September 2010. To achieve this, the Bank of Zambia utilised largely Open Market Operations to maintain reserve money within the programmed growth path. This was to be supported by the  BIS Review 148/2010  5  auctioning of Government securities and the maintenance of the fiscal deficit within the programme limits. Inflation Quarterly overall inflation increased to 1.6% in September 2010 from the 1.0% recorded in June 2010, but was slightly lower than the 1.7% recorded in the third quarter of 2009. This outturn was mainly attributed to the rise in food inflation to –0.1% from the –1.7% recorded in the previous quarter, as non-food inflation slowed down to 3.2% from 3.7% during the same period. However, on an annual basis, overall inflation was little changed at 7.7% in September 2010 when compared to the 7.8% recorded in June 2010, but was above the projected 7.3% for the period.