By Derrick Silimina

The Bank of Zambia’s Financial Stability Committee (FSC) has raised the alarm on increasing risks to the country’s financial system driven by a global oil shock and rising geopolitical tensions.

In a statement, BoZ Governor Denny Kalyalya warned that the financial sector remains a prime target for cyber attacks including high debt concentration and a heavy reliance on the US dollar which could further weaken the economy if global conditions worsen.

“If left unaddressed and the identified risks materialise, these vulnerabilities could amplify shocks to the financial system,” Dr. Kalyalya said.

He further stressed that the FSC is also concerned with vulnerabilities in the financial system arising from high loan and deposit concentrations, elevated dollarisation, and the re-deepening of the sovereign bank nexus.

The Central bank Governor has however noted that with reduced macroeconomic risks following further easing of inflationary pressures and a stronger international reserve position, which bolstered external sector resilience, these positive developments helped offset threats arising from lower economic growth and muted financial intermediation amid relatively sluggish private sector credit flows.

“The strengthening of banking sector health also shored up financial stability as banks continued upholding adequate buffers of high-quality capital, reflecting their ability to absorb unexpected losses in the event of adverse shocks.

Credit risk indicators improved further, with the non-performing loans ratio continuing to trend downward, reinforcing the banking sector’s soundness.”