Stock Markets enable firms to acquire the much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. The stock market also plays a resource mobilisation role by encouraging savings through the purchase of equities that meet investors risk preferences and liquidity needs. The provision of information on the stock market and its activity such as contained in the CASE handbook is therefore one way of promoting investor awareness and participation on our local market. This will no doubt enhance the development of the stock exchange and its contribution to our economy. Chairperson, as you may be aware, the Government of the Republic of Zambia has been implementing a comprehensive Financial Sector Development Plan (FSDP) since 2004, whose main objective is to broaden and deepen the financial sector in Zambia. Under the FSDP, the need for a well-developed capital market as an engine for economic development is emphasised as it among other things would enable investors have access to a wide range of investment options. It is for this reason that the Bank of Zambia together with stakeholders introduced a number of initiatives aimed at further developing the capital market. This includes the introduction of long term Government bonds, which among other purposes, was aimed at providing an appropriate platform for pricing corporate bonds. Furthermore, the Bank of Zambia in collaboration with LuSE and Bankers Association of Zambia is in the process of extending the services of RTGS to settle stock exchange transaction.

Another welcome development to the capital market is the recent B+ sovereign rating assigned to the country, as well as, the reclassification of Zambia as a low middle income country. These developments reflect the country’s recent strong economic performance. As  BIS central bankers’ speeches  1  you may be aware, GDP growth has averaged above 6% over the last five years, supported by low inflation and a positive external sector performance. These favorable developments put the Zambian business community and Government in a strong position to access finance for sustained economic growth and improved living conditions of all citizens. Ladies and Gentlemen, in the medium to long-term the prospects for Zambia’s economy are bright. The robust GDP Growth momentum is expected to be maintained premised on favourable growth performance in mining, agriculture, construction, tourism, manufacturing among other sectors. This will be supported by favourable commodity prices on the international market, Government’s investment in infrastructure and expected increases in foreign direct investment. Further, inflation is expected to remain in single digits owing to prudent macroeconomic policies and the bumper harvest recorded during the 2010/11 harvest season which is expected to dampen any negative effects on overall inflation through the food component. Accordingly, interest rates are expected to decline further. In addition, the macroeconomic environment is expected to remain favourable due to a projected strong external sector performance. In this regard, the capital market has an important role to play.