By Amos Sikaonga 
By Cecilia Chiluba
Bank of Zambia’s latest Financial Stability Report has revealed that volatility in the exchange rate could heighten in the near-term, if the global trade war escalates following the introduction of tariffs on US imports.
The April 2025 report indicates that the anticipated retaliatory tariffs could weigh on global growth and raise prices in advanced economies.
According to the Central Bank’s Financial Stability Committee (FSC), slower growth in the economies of Zambia’s major trading partners may dampen demand for commodity exports and constrain foreign exchange inflows from the mining sector, thereby intensifying demand-supply mismatches in the forex market.
“The FSC is monitoring developments relating to the escalation in the global trade war, which has generated extreme uncertainty that could potentially have adverse effects on financial stability”
“The uncertainties around US trade policies could also trigger a flight to safety, as investors pull out of emerging markets resulting in increased capital outflows.”
“This would lead to rapid depreciation of the exchange rate,” the Committee noted.
It however observed that exchange rate volatility has eased following higher market interventions and moderation in demand for foreign currency.
“Additionally, the increase in the negotiable threshold from US$1.0 million to US$ 5.0 million effected on 6 March 2026 helped hold variations in the exchange rate steady,” it said.
Meanwhile, the Committee revealed that the financial markets infrastructure comprising payments and securities settlement systems supported the safe and efficient functioning of the financial system in the six months to March 2025.
It said on average, the Zambia Interbank Payment and Settlement System (ZIPSS) processed about 5,500 transactions per day which remained below the daily capacity of 60,000 in transaction volumes.
“However, critical market infrastructure faced operational challenges as power outages disrupted information, communications and technology (ICT) infrastructure supporting the ZIPSS and Central Securities Depository (CSD) on 16 January 2024.
“The Bank will continue to review the overall effectiveness of appropriate response strategies to disruptive events through Business Continuity Management (BCM) simulation exercises”
“Further, the Bank is working toward designing and building data centers to Uptime Tier III Standards. These enhancements are expected to improve the reliability of systems which support critical financial market infrastructure.
During the review period, the Bank extended the operating hours of the ZIPSS and CSd, in a bid to support a 24/7 digital economy, aligning with the global settlement window.
Cecilia Chiluba