Purchase of foreign currency The aim of our buying foreign currency is to prevent an appreciation of the Swiss franc against the euro. This is the key component of our unconventional monetary policy. It is important to emphasise that we do not engage in foreign exchange interventions in order to  BIS Review 77/2009  1  bring about a depreciation of the Swiss franc, but to prevent any further appreciation of the franc in its role as a safe haven currency. Therefore, the reproach we occasionally hear that the SNB’s policy is encouraging an international depreciation race is unjustified. A look at exchange rate movements shows a clear appreciation of the Swiss franc during the course of the financial market crisis (cf. chart 1). So there can be no question of the SNB conducting a beggar-thy-neighbour policy. We give ourselves a great deal of latitude with regard to our foreign exchange interventions. There is no fixed threshold beyond which we become active; we simply decide in accordance with the situation at hand. And markets should not become used to a certain level of intervention. We feel that this approach promises the highest possible impact, which in turn will allow us to phase out the strategy more easily when the time comes. Furthermore, we do not comment on the volume of our foreign currency purchases. The purchases of foreign currency have fulfilled their purpose – and with these I am referring to our first unilateral interventions in the foreign exchange market since 1992.
In fact, on 10 July, 2009, I was privileged to participate at the “Foundation Stone Laying” ceremony for the multi-billion Stanbic Bank Zambia Limited new Head Office building. I therefore, commend the bank for its relentless effort in trying to modernise its facilities and expand its network. Allow me to conclude by appealing to all banks and other financial institutions to explore ways of enhancing the efficiency in service delivery. By enhancing efficiency, banks will be capable of offering more affordable banking services. This has the potential of drawing a larger number of Zambians to the financial system resulting in an expanded banking clientele for the benefit of both the banks and the economy. This will go a long way in complementing the Government and the Bank of Zambia’s efforts in addressing the various weaknesses in the financial sector as well as to guide efforts for realising the vision of a stable, sound and market based financial system that would support the efficient mobilisation and allocation of resources necessary for economic diversification and sustainable growth. In the recent past, the Government has adopted prudent fiscal policies that enabled the private sector to access more credit from the financial system. In line with this, the yields on Government securities have drastically reduced with the 91 days Treasury bill rate dropping to 7.88% in the latest auction while inflation has also trended downwards to 12.3% in October. Some players have responded positively to these market movements by reducing their lending base rates.