The Bank of Zambia has raised its key interest rate for the first time since November 2015 in a bid to stabilize the deteriorating currency and support macroeconomic stability.
The Central Bank has raised the Monetary Policy Rate to 10.25 percentage from 9.75 percent, Governor Denny Kalyalya told Journalists at a media briefing in Lusaka today.
Although the country’s annual inflation rate for the month of April is at 7.7 percent, the Central Bank projects that over the next eight quarters, inflation is projected to rise above the 6 to 8 percent target range for this year as some of the risks to inflation outlined in the previous MPC have begun to materialise.
Lower maize output, continued elevated fiscal deficits, high debt service payments and the decline in gross international Reserves are among the key upside risks to inflation, Dr. Kalyalya said.
He said these risks have also contributed to heightened adverse market sentiments and are exerting pressure on the exchange rate.
And Dr. Kalyalya said the demand for government securities at auctions remained weak during the first quarter of 2019.
He said the subscription rate for government bonds fell 29 percent from 33 percent previously however the subscription rate for Treasury bills rose to 91 percent from 88 percent.