Zambia hikes key interest rate to curb inflation

18 May 2023

Zambia’s central bank has hiked its key interest rate for the second time this year in a bid to contain double-digit inflation and bolster the country’s currency, which has been under pressure from sluggish progress in debt-restructuring negotiations.

The Bank of Zambia’s monetary policy committee raised its key interest rate by 25 basis points to 9.50% on Wednesday as inflation in the nation remained high.

According to the central bank, inflation in Zambia was forecast to stay above the target range of between 6% and 8% until the final quarter of next year, Reuters news agency reports.

Furthermore, annual inflation edged up to 10.2% last month from 9.9% in March.

The Bank of Zambia also hiked its main rate by 25 basis points at the previous rate-setting meeting back in February, after keeping the rate the same at 9.0% since November 2021, the Reuters report goes on to add.

The southern African nation was the first in Africa to default on its sovereign debt during the Covid pandemic and has been struggling to secure a deal to revamp $12.8 billion in external loans. 

Last August, Zambia secured funding from the International Monetary Fund of $3 billion.

“Further delays in external debt restructuring negotiations, tighter global financial conditions... the impact of the prolonged Russia-Ukraine war on food and energy prices remain key upside risks to the inflation outlook,” the central bank said in a statement.