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Contrary to speculations, the Bank of Zambia (BoZ) has reduced the Monetary Policy Rate by 25 basis points to 13.25 percent from 13.5 percent following improved inflation performance and relative stability in the exchange rate.
The decision was announced on Wednesday by BoZ Governor, Denny Kalyalya, during the latest Monetary Policy Committee briefing in Lusaka.
Kalyalya said inflation had returned to the central bank’s target range of six to eight percent during the first quarter of 2026, declining to 7.1 percent in March from 11.2 percent in December 2025.
He said inflation further eased to 6.8 percent in April.
According to Kalyalya, the reduction in inflation was largely driven by continued base effects in maize grain and related food products, coupled with the appreciation of the Kwacha against the United States dollar.
“The appreciation of the exchange rate affects inflation both immediately and over time through lag effects,” he said.
The Committee also cited expectations of another favourable maize harvest during the current crop marketing season and continued stability in the Kwacha/US dollar exchange rate as factors supporting the policy rate adjustment.
However, Kalyalya cautioned that uncertainties stemming from the conflict in the Middle East remained a major upside risk to inflation, prompting the central bank to maintain a cautious monetary policy stance.
Despite these risks, the BoZ projects inflation to remain within the six to eight percent target range from the second quarter of 2026 through to the first quarter of 2028.
The central bank is forecasting annual average inflation at 6.8 percent in 2026 and 6.1 percent in 2027 before edging slightly higher to 6.6 percent in the first quarter of 2028.
Meanwhile, Kalyalya disclosed that Zambia’s gross international reserves reached a historic high of US$6.5 billion in February 2026, mainly supported by foreign exchange purchases.
He said reserves later closed the first quarter at US$6.2 billion, equivalent to 5.2 months of import cover, compared to US$5.5 billion or 4.8 months of import cover recorded at the end of December 2025.
“The slight decline in reserves in March was largely attributed to Government payments linked to fuel procurement amounting to US$114.7 million, central bank interventions to support the foreign exchange market valued at US$106.5 million, and Government debt service payments of US$40.1 million,” Kalyalya said.
The BoZ Governor further revealed that the central bank purchased 154.3 kilogrammes of gold valued at US$25.4 million during the first quarter under its local gold acquisition programme.
Total gold holdings have now increased to 3,380.78 kilogrammes with a market value of US$500.9 million since the programme was launched in December 2020.
“As of May 12, the average price of gold was US$4,688.53 per ounce,” he said.
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