to moderate the inflationary pressures arising from low crop output, on a sustainable basis, efforts should be directed at diversifying and improving agricultural output away from rain - fed agricultural practices. government ’ s commitment to increased investment in the agricultural sector is therefore commendable as this should assist in improving the supply of agricultural output, in particular that of food items. this has an important bearing towards reducing consumer food inflation. similarly, although it is not possible to completely eliminate inflationary pressures stemming from rising world oil prices, efforts are nonetheless needed to moderate their impact on the economy. to this end, such efforts as conserving the use of petroleum products can go a long way in reducing the attendant inflationary pressures. allow me now to turn to the issue of interest rates. as you may be aware, interest rates refer to the price of money. over the last few years the general trend in commercial banks ’ weighted average lending rates has been largely downwards. as at end - june 2005, the weighted average base lending rate had reduced to 28. 6 % from 36. 2 % in january 2004. the fall in lending rates has in large part been induced by a fall in yield rates on government securities as banks in zambia have tended to use yield rates as anchors. however, at the current levels, lending interest rates are too high to contribute to sustainable productive investment. this calls for concerted efforts among other key stakeholders, namely, the government, commercial banks and the borrowing private sector to continue playing their respective roles effectively to bring about a further reduction in the lending interest rates. it has also to be appreciated that inflation is another major contributing factor to high interest rates as banks set their lending interest rates above the rate of inflation thus the need to reduce the high inflation that has characterised the economy. on our part, we will do all we can, using all monetary instruments at our disposal, to contribute to reducing inflation and therefore, interest rates. as regards the exchange rate, this refers to the price of one currency in terms of another. in our case, it refers to the relative price of the kwacha against other currencies. the price of the kwacha against other currencies is directly determined by supply and demand conditions in the foreign exchange market and indirectly through the conduct of monetary policy. to improve the operations of the foreign exchange market, the bank of zambia developed the broad - based inter - bank foreign exchange system where suppliers ( traditional and non - traditional exporters ) and users (

of granular data ( bender et al. 2018 ). 2 2 financial stability implications of fiscal measures when the pandemic hit in spring 2020, governments implemented bold and comprehensive fiscal measures. in order to assess the implications of these measures for financial stability, the european systemic risk board ( esrb ) started a regular monitoring of fiscal measures undertaken by its 30 member states. reporting is on a quarterly basis and includes characteristics, the announced size, and the take up of loan moratoria, public loans, and public guarantees. the corresponding report shows that the fiscal response designed to support the real economy has stabilised lending and that the financial system has continued to fulfil its key functions ( european systemic risk board 2021 ). it also shows heterogeneity of policy responses across countries : countries hit harder by the pandemic tend to have larger programmes with greater uptake, while countries with more employees in vulnerable sectors rely more on direct grants. the uptake of moratoria is positively correlated with the debt levels of non - financial corporations and private households before the pandemic. the report also identifies a number of policy priorities. they comprise the need to monitor private debt sustainability, preparing for a scenario of increased distress in the corporate sector, enhancing financial institution ’ s balance sheet transparency, and coordinating policies across countries good data that are available across countries are also crucial for analysing the effects of a withdrawal of policy measures : if fiscal support is withdrawn too soon, this could exacerbate the effects of the economic crisis and put financial stability at risk. however, if fiscal support is maintained for too long, structural change could be delayed. managing this trade - off effectively requires access to timely and reliable information on the state of the economy and the effects of policy measures. 2 / 4 bis central bankers'speeches 3 dealing with structural change looking beyond the cyclical impact, the pandemic will most likely accelerate structural change related to digitalisation or climate change. intensified structural change, in turn, will not only impact the real economy but will also leave its mark on the financial system. ultimately, banks must be able to exit the market, without jeopardising financial stability, if their business models are no longer viable. thanks to the reforms of the past few years, we now have better instruments at our disposal for dealing with banks in distress. this is one of the conclusions drawn in the too - big - to - fail evaluation by the financial stability board ( fsb )