Zambia leaves policy rate on hold, trims 2022 forecasts

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FILE PHOTO: A truck at the Chibuluma copper mine

By Chris Mfula

LUSAKA (Reuters) – Zambia’s central bank kept its monetary policy rate unchanged at 9.0% on Wednesday, and lowered its inflation and economic growth forecasts for this year.

The bank cited upside inflation risks, lingering vulnerabilities in the financial sector and weak domestic economic growth among reasons for its decision.

The Bank of Zambia has kept its main lending rate at 9.0% since November 2021.

Annual inflation peaked at 24.6% in the middle of last year and had declined steeply until June, when it reached 9.7%, before edging up to 9.9% in July.

Central bank governor Denny Kalyalya told a news conference that inflation was forecast to fall back within the bank’s 6%-8% target range during the first quarter of 2024.

The bank now sees inflation averaging 11.4% this year, down from 12.5% seen in May. Real gross domestic product is seen growing 3.1% in 2022, down from a 3.5% projection in May.

In 2020, Zambia became the first African country to default on its sovereign debt during the COVID-19 pandemic.

It hopes that the International Monetary Fund’s executive board will approve a $1.4 billion lending programme as soon as the end of this month, after its official creditors pledged to negotiate a debt restructuring.

(Reporting by Chris Mfula; Writing by Alexander Winning; Editing by Kim Coghill)

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