Zambia’s central bank raised its key lending rate to 14.50% for the second consecutive time to combat rising inflation, now at 16.7%. The forecast for inflation has increased, with economic growth projected to recover by 2025, supported by improvements in agriculture and the mining sector after last year’s drought.
Zambia’s central bank has again increased its main lending rate, raising it by 50 basis points to 14.50%, the highest since 2016. This move aims to combat inflation, which surged to 16.7% in January, significantly exceeding the bank’s target range of 6%-8%. Bank of Zambia Governor Denny Kalyalya emphasized the need to curb expectations of further inflation increases.
Inflation has been affected by the severe drought experienced last year, leading to increased food and power importation. The central bank’s inflation projection for this year has also risen to an average of 14.6%, up from the previous estimate of 13.9% made during their last meeting.
Growth in Zambia’s economy has slowed due to the drought but is set to recover, with a growth forecast of 6.6% for 2025. The drought impacted agricultural productivity and hydroelectric power generation, particularly from the Kariba Dam, prompting government action to secure imports. Recent rainfall has improved conditions for both agriculture and electricity production.
As a prominent copper-producing nation, Zambia is counting on its mining sector alongside agriculture as key drivers for economic recovery.
In conclusion, Zambia’s central bank is proactively addressing persistent inflation by elevating interest rates, responding to external shocks like a drought that has critically impacted food and energy sectors. The expectation for economic recovery is bolstered by improved weather conditions, alongside a focus on strengthening the mining industry.
Original Source: clubofmozambique.com
