Third, substantial progress has been made on the large adjustment of financial positions in the household and financial institution sectors necessary after the substantial leveraging of households and financial institutions that occurred in the run-up to the financial crisis. Confidence is increasing that conditions are now in place to support sustained abovepotential growth, when it occurs.   Aided by the second installment of Large-Scale Asset Purchases (LSAPs), financial conditions have improved. After equity prices, interest rates and inflation expectations fell with the apparent slowing of the economic recovery in the summer, they began to move up again shortly after Chairman Bernanke’s speech laying out potential responses to the slowdown in late August in Jackson Hole, Wyoming (Charts 17–20).   The personal saving rate has risen to a level that is consistent with the historical relationship between that rate and household net worth relative to disposable income, reflecting the very large drop in household net worth from the combined impact of financial crisis and severe housing downturn (Charts 21–22).   The household financial obligation ratio has declined to the level that prevailed in the mid 1990s, reflecting a combination of debt repayment, debt charge-offs and lower interest rates (Chart 23). Households in all credit-quality quintiles are continuing to reduce their overall debt (Chart 24).   Banks tightened lending standards during the financial crisis and recession. Bank lending standards, while tight in level terms, have begun to ease (Chart 25).
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.