Bank of Zambia keeps countercyclical capital buffer at 0.0% as Financial Stability Committee reports easing risks

The Bank of Zambia issued a Financial Stability Statement setting out the Financial Stability Committee’s April 2025 assessment that risks to financial stability have declined since the October 2024 Financial Stability Report, driven by easing financial market stress and an improved macroeconomic environment. The Committee decided to maintain the countercyclical capital buffer at 0.0 percent. Financial markets risk was assessed to have eased as asset valuations rose and volatility fell, with lower Government securities yields, higher equity prices, reduced money market volatility and more stable exchange rate conditions supported by central bank smoothening operations. Macroeconomic risks moderated as economic activity was stronger than expected and sovereign risk declined, while the credit-to-GDP gap contracted further and remained below the Basel III recommended threshold of 2.0 percentage points. However, the Committee flagged lingering vulnerabilities including the electricity supply deficit, low financial intermediation and private sector credit growth, an elevated share of foreign-currency-denominated loans and widening maturity mismatches, while monitoring uncertainty from the escalating global trade war; it also noted that banks remain adequately capitalised but face balance sheet imbalances linked to foreign-currency lending and interest rate risk, alongside non-bank sector concerns including low insurance profitability and pension fund liquidity risks from contribution arrears. The next Financial Stability Committee statement is scheduled for October 2025.