By BUUMBA CHIMBULU
Delays in concluding the debt restructuring process has continued to add pressure on inflation rate, leading to the upward adjustment of the monetary policy rate to 9.5 percent by the Bank of Zambia (BoZ).
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”4,5,6″ ihc_mb_template=”2″ ]
The monetary policy rate has been increased by 25 basis points to 9.5 percent from 9.25 percent, the second time it has been adjusted upwards this year.
In adjusting the policy rate, the Central Bank Committee took into account fragile growth, vulnerabilities and risks in the financial sector.
The decision, is therefore, meant to manage price escalation and financial stability while getting inflation rate to the targeted range of six to eight percent in the medium term.
Zambia’s Inflation rate is currently at 10.2 percent.
This is according to the BoZ Governor, Danny Kalyalya at the Monetary Policy Rate announcement in Lusaka yesterday at a press briefing.
Dr Kalyalya cited the continued delays in external debt restructuring negotiations and tighter global financial conditions as among upside risks to inflation outlook.
The country is currently in the process of restructuring its debt with creditors while pushing for the release of a second tranche of US$188 million distribution from the International Monetary Fund (IMF).
“Other factors include higher maize prices due to the anticipated lower production amid strong regional demand, as well as the impact the prolonged Russia-Ukraine war on food and energy prices,” he said.
Dr Kalyalya stated that much as inflation declined in the first quarter of 2023, it remained elevated and was projected to stay above the target band of six to eight percent the next eight quarters.
In the first quarter of 2023, he recalled, inflation averaged 9.6 percent compared to 9.8 percent in the fourth quarter of 2022.
“In April 2023, inflation rose to 10.2 percent from 9.9 percent in March. This was mostly driven by strong regional demand for maize grain and maize meal and the lagged pass-through from the depreciation of the Kwacha against the United States dollar.
“Decisions on the policy rate will continue to be guided by inflation outcomes, forecasts, and identified risks, including those associated with financial stability and external debt restructuring,” Dr Kalyalya said.
[/ihc-hide-content]
