invited to occasions such as the one we are witnessing today, because it gives us an opportunity to share with you and the public some of the key developments that are taking place in our financial sector and the economy at large. in this regard allow me to say something about what is currently the most topical issue not only in the financial sector but in the national economy as a whole. this is statutory instrument 32 now revised and re - named si 55 on the monitoring of balance of payments. ladies and gentlemen, as the name of the si suggests, the aim is to “ monitor ” and not to “ control ”. there has been much public debate on this subject matter which seems to suggest a public misunderstanding of the intentions of the si. some quarters have gone so far as to link the issuance of si 55 to the earlier issued si33 as amended through si78 ( currency regulations ) and concluded that government is introducing exchange controls. bis central bankers ’ speeches managing director, distinguished invited guests, ladies and gentlemen, allow me to clarify that si33 was issued with the primary intention of reinforcing the use of kwacha, which legal tender, for all domestic transactions. this is in line with practice in most countries around the world. the si has is no way intended to stifle business. the initial monitoring of balance of payments regulations were initially issued under si 32. when the government issued si 32, bank of zambia embarked on an exercise to seek the views of the financial system players, the business community and the public at large. arising from these stakeholder engagements, it became clear that some of the provisions of si 32 would impede the smooth flow of business. it was also evident that the timeframe within which stakeholders were supposed to prepare for the implementation of the si was not adequate. the bank of zambia therefore compiled all the stakeholder inputs and comments and submitted proposed amendments to government. managing director, i am glad to report that government responded favorably to the submissions made and have today re - issued the regulations as si 55, incorporating the majority of the proposed amendments. as you may be well aware, government extended the date of implementation of the si to 1st july 2013 from the initial 16th may 2013. i now urge all stakeholders to read the new regulations carefully and make appropriate representations where need arises. the commercial banks in particular will play a critical role in giving guidance to their customers on the regulations. the si has already been posted to the bank of zambia website which can be accessed from

does not always yield the expected benefit of reduced prices. innovation is clearly an important phenomenon of any sector of a modern economy. successful financial innovation must reduce costs and result in the provision of improved services and affordable financial resources to users, particularly to the productive sector. a low level of innovation and development in the financial sector produces a weak impact of financial intermediation on economic growth. the right kind of innovation obviously would help the financial sector fulfill its core functions ; and if the financial sector fulfilled its functions better and at lower cost, it would almost surely contribute to growth and societal well - being. it is essential to realise that for the most part, the financial system is not an end in itself but a means to an end and the measure of the success of the financial system must relate to its success in accomplishing broader societal functions. innovations in the financial system that help it perform these tasks better and at lower cost almost surely lead to increased societal well - being, and to the extent that our gdp measures capture these benefits, in higher measured growth. notwithstanding the benefits of innovation, it is important to note that the opening up to new activities and products, particularly the expansion of the credit portfolio, brings in a myriad of new risks associated with the new activities. studies have shown that increasing financial innovation and deepening of financial markets brings with it challenges and risks, which if not well addressed, can threaten the health of the financial system and may cause havoc to the stability of a financial system. bis central bankers ’ speeches 4. 0 the role of the bank of zambia in promoting innovation and competition the bank of zambia ( boz ) acknowledges that a stable, sound and efficient financial sector has to be underpinned by infrastructure development. the boz achieves this by creating an enabling environment through the legal and regulatory frameworks that promote financial systems stability and development. the boz also regulates the conduct of the banks to ensure that players in the sector have a level play - field in order to safeguard the interests of both investors and customers of the banks. it is against this background that one of the key functions of the bank of zambia is to regulate the activities of banks and financial institutions so as to promote safe, sound and efficient operations of financial institutions and the development of the financial system. in 2004 the boz and the government in consultation with other stakeholders, formulated the financial sector development plan ( fsdp ), which is a long term vision and development strategy aimed at addressing major constraints to the development