The Bank of Zambia has left its main lending rate unchanged at 8.0%.
Governor Christopher Mvunga said at a news conference Wednesday morning adding that the Policy Monetary Committee had to balance boosting the economy with attracting inflows and supporting the Kwacha.
Mr. Mvunga pointed out that successfully navigating a debt restructuring following a sovereign default was essential for Zambia to return to fiscal fitness.
He said while the rate of price growth is expected to moderate over the next two years, it’s likely to remain above target.
Mr. Mvunga said risks to the inflation outlook remain tilted to the upside adding that the economy will probably contract by 4.2% this year and recover at a slower pace than previously thought due to limited fiscal space.
“Successfully navigating the debt-restructuring process to restore debt sustainability and implementing fiscal and other structural reforms are critical to return to fiscal fitness,” Mr. Mvunga said.
He said the Policy Rate has been maintained at 8.0% to moderate risks to financial stability and support growth, lives and livelihoods.
Mr Mvunga said this decision also allows monetary policy measures taken earlier in the year to take full effect adding that this is despite inflation being projected to persist above the 6-8% target range throughout the forecast horizon
“The Committee noted that financial stability remains fragile despite signs of marginal improvement in economic activity in the third quarter following the partial relaxation of Covid-19 restrictions.”