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Bank of Zambia raises benchmark interest rate to 12.5%, as international reserves reach $3.3 billion


Zambia’s Central Bank has hiked its benchmark lending rate by 150 basis points to 12.5 percent.

This was done to steer inflation to the target band of between six to eight percent and help anchor its expectation, Bank of Zambia Governor, Denny Kalyalya, said in Lusaka on Wednesday.

Read more: Bank of Zambia raises cost of money by 100 base points amid persistent inflationary pressure

Kalyalya during the Monetary Policy briefing stated that the Committee decided to raise the monetary policy rate by 150 basis points to 12.5 percent from 11 percent the previous quarter.

In raising the policy rate, Kalyalya pointed out that the Committee took into account the stability of the financial sector and the importance of robust growth over a medium to long term.

He spoke on persistent depreciation of the Kwacha against major currencies and elevated food and energy prices, which have continued to push the inflation up in the fourth quarter of 2023.

Kalyalya stated that inflation rose to an average of 12.9 percent from 11 percent in the third quarter.

This he said inflationary pressure continued, with annual inflation rising to 13.2 percent from 13.1 percent in December 2023.

“Decision on the policy rate will continue to be guided by the inflation outcomes, forecast and identified risks, including those associated with financial sector stability.

“The Bank stands ready to take appropriate action should inflation persist above the six-eight target band,” Kalyalya said.

He also spoke on the fiscal consolidation undertaken by the government.

“The Committee is encouraged by the continued fiscal consolidation efforts, progress on external debt restructuring and improved prospects of increased investment in key sectors of the economy, as these are critical to the attainment and maintenance of sustainable macroeconomic stability,” Kalyalya said.

On international reserves, the Governor said the international reserves increased to US$3.3 billion, which are equivalent to 3.7 months of import cover at end-December 2023 from US$2.9 billion (3.2 months of import cover) at end-September 2023.

He attributed this to the rise to disbursements by the International Monetary Fund and the World Bank after a successful Second Review under the Extended Credit Facility in December 2023.

Kalyalya indicated that in 2023, the Bank had purchased gold amounting to US$43.2 million, bringing the total to US$150.5 million since the Bank started purchasing gold.

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