Overall, the composite weighted average Treasury bill yield rate stood at 16.2% in 2005, down from 17.8% recorded in 2004. In contrast, the composite yield rate on Government bonds stood at 23.0%, up from 20.9% registered in 2004. As at May 5, 2006, the composite weighted average Treasury bill yield rate came down sharply to 7.7% while the composite yield rate on Government bonds declined to 11.0%. The sharp reduction in yield rates on Government securities has been due to low inflation expectation coupled with high demand for these securities by the non-bank financial institutions and private sector. Mr Chairman, with respect to developments in the money market, commercial banks lending rates have also been coming down, though not as fast as the decline in inflation and Treasury bills rates. Commercial banks nominal weighted average lending base rate declined from 29.8% in 2004 to 27.6 % in 2005. As at May 5, 2006, the weighted average lending base rates stood at 23.7%. Clearly, there is a need for commercial banks to do more to reduce lending rates in order to influence a substantial expansion of private sector credit. Lower lending rates will contribute to the reduction in the cost of doing business in Zambia. Sustainable lowering of lending rates by commercial banks should occur in the current environment of low inflation. Distinguished Guests, Ladies and Gentlemen, the macroeconomic gains attained in 2005 will be consolidated in 2006. The real GDP growth is projected at 6.0% while inflation is projected at 10.0%.
We must resist the temptation to go into reverse; we shouldn’t agree to stand still: we must forge ahead towards more integration. As a central banker, I am more of an observer than an actor in this area. Monetary policy is only one part of this. But even the harshest critics acknowledge that the ECB is an institution that functions well and has the capacity to take decisions and to avoid catastrophes. The same effectiveness would be required at the political level, even if, admittedly, it is more difficult. And, as I said earlier, the crisis did not reveal the weaknesses of monetary union, but rather the weaknesses of an incomplete monetary union. BIS central bankers’ speeches  3