The Financial Markets department, established in 1994, serves as a monetary policy implementation arm of the Bank of Zambia. It does so by applying market based instruments in order to improve the management and implementation of monetary policy.
Open Market Operations (OMO) is one of the most innovative and significant policy initiatives undertaken by Bank of Zambia in the implementation of monetary policy. It involves the purchase from or sale of funds to commercial banks with a sole purpose of smoothening out short-term liquidity imbalances in order to influence short-term interest rates.
Implementation of the exchange rate policy contributes to the bank’s overarching goal of price stability. This is discharged through interventions in the foreign exchange market, which involves buying, and selling foreign exchange, as well as monitoring the exchange rate with the objective of achieving a stable and competitive exchange rate in order to foster sustainable growth in the economy.
As the fiscal agent for the Government, Financial Markets undertakes all primary issuances and redemptions of Government securities – Treasury bills and Government bonds. Government securities serve a dual role – as a fiscal policy tool in that they facilitate Government borrowing from the general public and as a monetary policy instrument used for liquidity management.