The Bank of Zambia (BoZ) increased its key interest rate by 100 basis points to 11% on Wednesday in a bid to curb soaring inflation.

During a quarterly press briefing, the governor of the country’s central bank, Denny Kalyalya said the government needs a strong policy response to boost inflation expectations and return it to within the target range of between 6% and 8%.

In addition, the Bank of Zambia governor underscored elevated growth prospects, noting the GDP revision for this year as a result of higher-than-forecast growth in sectors including information and communication technology, education, transport and tourism during the first nine months of the year.

Zambia’s economy is forecast to grow at a faster rate of 4.2% this year, a rise from the prior forecast of 2.7%. Growth of 4.7% is expected in both 2024 and 2025.

Furthermore, with the Kwacha at record lows against the Dollar this month, the Bank of Zambia increased the statutory reserve ratio by 2.5 percentage points to 17% from a previous 14.5%. Deputy governor of the central bank, Francis Chipimo, said during a statement that the increase – the third in 2023 – was fuelled by ongoing foreign exchange market pressures leading to higher inflation.

On Monday, the International Monetary Fund said additional policy tightening may be required as it unveiled a staff-level agreement to unlock $184 million for Zambia under its support program, Bloomberg reports.

This came as the country’s debt restructuring efforts encountered a setback earlier in the week as the government announced a revised deal to rework $3 billion of Eurobonds couldn’t come into effect, Reuters reports, because of opposition from official creditors, including China.