Zambia Central Bank Increases Lending Rate to 8.5%

Zambia’s central bank on Wednesday increased its benchmark lending rate by 50 basis points to 8.50 per cent in response to escalation of the inflation rate and a weak economic environment.

The Bank of Zambia (BoZ) governor, Christopher Mvunga, said this at a news briefing on the decisions made by the Monetary Policy Committee (MCP) which met on Monday and Tuesday.

“The decision balances the need to contain rising inflation and anchor inflation expectations against the efforts made to support financial system stability and growth,” Mvunga said.

He said ensuring inflation remains well anchored in the medium term was essential to moderate fragilities in the financial sector and support economic recovery.

According to him, escalation in the inflationary pressures was pushing inflation further away from the 6-8 per cent target range.

Zambia’s annual inflation has been on a rising trajectory reaching 21.5 per cent in January mainly driven by a rise in food prices.

The central bank chief further said implementation of a strong fiscal policy adjustment was critical in restoring macroeconomic stability.

While indicating that the economy was projected to recover in 2021, he expressed concerns over the uncertainty surrounding the resurgence of the COVID-19 which poses a risk to the growth outlook.