“Monetary Policy Unchanged”
.. Bank of Zambia Retains 13.5% Rate to Address Inflation and Growth Concerns
By Francis Maingaila
Lusaka, Zambia – (14-08-2024) – The Bank of Zambia (BoZ) has decided to maintain its Monetary Policy Rate at 13.5 percent following the Monetary Policy Committee (MPC) meeting on August 12-13.
BoZ Governor Danny Kalyalya announced this decision in a media briefing, citing persistent inflationary pressures that remain above the central bank’s target range of 6-8 percent.
Inflation increased to an average of 14.6 percent in the second quarter of 2024, up from 13.5 percent in the first quarter, and rose further to 15.4 percent in July.
“This rise is attributed to the weakening Kwacha, higher food and energy prices, and the impact of a recent drought that disrupted food supply chains and drove up prices. Food inflation reached 16.2 percent,” he explained.
Despite a moderation in the Kwacha’s depreciation and improved foreign exchange supply, Dr. Kalyalya explained that inflationary pressures remain significant.
He said the BoZ’s decision to keep the policy rate unchanged is aimed at stabilizing the financial system and addressing these inflation concerns.
“The BoZ has revised its inflation forecasts upward, expecting rates of 15.3 percent for 2024, 12.7 percent for 2025, and 10.8 percent for the first half of 2026,” he noted.
“These projections reflect ongoing challenges such as persistent food price increases, load management issues in the electricity sector, and other supply disruptions,” he added.
Kalyalya noted that despite an improvement in foreign exchange reserves and a slowdown in the Kwacha’s depreciation, the central bank’s focus remains on controlling inflation.
“Gross international reserves have increased to $3.9 billion, covering 4.3 months of imports, supported by a $569.6 million disbursement from the IMF,” he observed.
He also highlighted challenges with the National ID system and the importance of managing long-term investment funds effectively.
The Governor emphasized that inflation is expected to average 15.3 percent for 2024, above the earlier projection of 13.7 percent, but should ease to 12.7 percent in 2025 and further to 10.8 percent by mid-2026.
He said the MPC determined that holding the policy rate steady was the most suitable action given the effects of previous rate hikes and recent foreign exchange market reforms.
Dr. Kalyalya stressed the need for continued fiscal discipline, structural reforms, and stronger stakeholder cooperation to navigate current economic challenges.
He added that future decisions on the policy rate will depend on inflation trends and financial stability risks.