Zambia Interest Rate2012-2020 Data | 2021-2022 Forecast | Calendar | Historical

The Central Bank of Zambia lowered its benchmark interest rate by 225 bps to 9.25% during its May 2020 meeting. The decision aimed at supporting economic activity and the financial sector stability against the adverse effects of the global pandemic, despite persistent inflationary pressures. Policymakers noted that inflation climbed to a near 4-year high of 15.7% in April, largely due to the sharp depreciation of the kwacha against the US dollar and the increase in food prices; and it is seen moving towards the upper bound of the 6-8% medium-term target range at the end of the forecast horizon in Q1 2022. The economy is projected to shrink by 2.6% in 2020 from a growth of 2.9% in 2019, the first contraction in over 20 years, amid a significant reduction in consumer and investment spending caused by disruptions in business operations. The bank urged for concerted efforts to deal with the pandemic shock and its effects along with the implementation of fiscal and structural reforms.

The Central Bank of Zambia held its benchmark interest rate steady at 11.5% during its February 2020 meeting, citing inflationary pressures and weak growth. Policymakers noted that headline inflation peaked to 12.5% in January, following the upward adjustment in electricity tariffs and fuel pump prices coupled with rising maize prices. It is projected to remain elevated over the earlier part of two-year forecast period and thereafter fall towards the upper-bound of the target range of 6-8% as food supply improves. The GDP growth is estimated to have slowed to 2% in 2019 from 4% in 2018, amid contractions in mining, electricity, cement output and manufacturing. Still, the bank expects it to quicken to 3% in 2020 and 3.7% in 2021, assuming recovery in the agriculture, electricity and mining sectors. Finally, the Committee voiced concerns about the slow pace of fiscal consolidation and urged to accelerate its implementation along with structural measures to curb debt.

The Central Bank of Zambia raised its benchmark interest rate by 125 bps to 11.5% during its November meeting, saying that the decision aims to curb inflationary pressures and bring inflation back to the target range to restore macroeconomic stability. Policymakers noted that some upside risks to inflation have begun to materialise, including persistent high food prices, electricity disruptions, slow fiscal consolidation and high debt. In October, annual inflation hit a 3-year high of 10.7%, mainly influenced by drought; and it is projected to remain above the upper band of 6-8% until Q3 2021. Also, the GDP growth is expected to decline sharply to 2% in 2019 from 4% in 2018, amid lower agricultural and mining output and constrained electricity supply. The bank stressed that monetary policy needs to be complemented by corrective fiscal and structural policy measures; adding that it would further lift policy rate if inflation persistently remains above the target.

The Central Bank of Zambia left its benchmark interest rate unchanged at 10.25 percent at its August 21st 2019 meeting, to counter inflationary pressures and support growth. In July, headline inflation picked up to a near 3-year high of 8.8% mostly due to higher cost of food and it is projected to remain above the upper bound of the target range of 6-8% until Q2 2021, but to revert to the target towards the end of the period. Policymakers voiced concerns about the further weakening of near-term growth prospects, liquidity challenges and risks to financial stability amid persistent fiscal deficits and elevated debt. The real GDP is expected to decline in 2019 mainly due to the effects of drought in agriculture, constrained electricity generation and lower than anticipated mining output. Finally, the bank hinted that may adjust policy rate upward, if inflation does not revert to the target range.