In a midweek decision, Zambia’s central bank implemented a 50 basis point increase in its key lending rate, setting it at 10.0%. The action was driven by the acknowledgment of inflation’s divergence from its intended trajectory and the prospect of its enduring elevation.
This marked the bank’s third instance this year of elevating its principal rate to curb inflation (ZMCPIY=ECI), which surged from 9.8% in June to 10.3% year-on-year in July.
Anticipating a persistent trend, the central bank, on Wednesday, projected an average inflation rate of 10.2% for the year 2023 and 9.3% for both 2024 and the initial half of 2025. This trajectory significantly surpasses the designated target range of 6% to 8% as specified by the bank.
Amid the COVID-19 era, Zambia stood as the inaugural African nation to experience a sovereign debt default, a situation that ultimately culminated in June of this year with the successful negotiation of a restructuring arrangement with its official creditors.
Kalyalya emphasized that determinations regarding the policy rate will persist in being shaped by the trajectory of inflation, upcoming predictions, and potential risks, encompassing those linked to external debt restructuring.