Zambia Interest Rate2012-2021 Data | 2022-2023 Forecast | Calendar | Historical

The Central Bank of Zambia raised its key interest rate by 50 bps to 8.5% at its February 2021 meeting, to anchor inflation expectations and restore macroeconomic stability. It was the first rate increase since November of 2019, amid rising inflationary pressures, which are pushing inflation further away from the upper bound of the bank's 6-8% target range. The risks to the inflation outlook are assessed to be tilted to the upside and inflation is expected to deviate further from the upper bound of the target due to the lagged pass-through from the depreciation of the kwacha and sustained fiscal deficits. Meanwhile, high-frequency indicators of domestic activity point to a less severe contraction in real GDP in the last half of 2020 following the partial relaxation of COVID-19 restrictions. In the medium-term, the economy is projected to recover supported by mining, utilities and information & communication. The bank added it stands ready to further tighten monetary policy if needed.

The Central Bank of Zambia left its benchmark interest rate unchanged at a record low of 8% during its November 2020 meeting, to moderate risks to financial stability and support growth, allowing the previous policy measures taken earlier in the year to be fully transmitted. The economy is projected to shrink 4.2% in 2020 and recover at a weaker pace than earlier anticipated due to limited fiscal space, as well as uncertainty surrounding the persistence of the Covid-19 pandemic and access to external financing. The Committee also noted that inflation rose to 16% in October from 15.7% in September largely reflecting the weakening of the kwacha; and it is seen moderating somewhat but will likely remain above the 6-8% target range until the third quarter of 2022. Zambia became the first African country to default on its Eurobond after it missed an overdue coupon payment of $42.5 million on November 13th.

The Central Bank of Zambia cut its benchmark interest rate by 125 bps to 8% during its August 2020 meeting, to safeguard the financial sector stability and people's lives and livelihoods in the wake of the Covid-19 pandemic. The Committee noted the significant worsening in economic conditions over the second quarter and now sees the economy shrinking by 4.2% in 2020, deeper than an earlier projection of a 2.6% contraction, as disruptions caused by the pandemic crisis should continue to be felt in sectors such as tourism, wholesale & retail trade and construction. The overall inflation is expected to steadily decline and reach the upper bound of its 6-8% target range by the end of its forecast horizon, assuming a moderation in food prices due to the improvement in the supply of food items, in particular maize. The bank finalized saying that urgent macroeconomic adjustment measures remain imperative to promote sustainable development.

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.