Monday, June 24, 2024

Bank of Zambia Raises Monetary Policy Rate to 9.50 Percent


The Bank of Zambia’s Monetary Policy Committee (MPC) has announced a 25 basis points increase in the Monetary Policy Rate (MPR) to 9.50 percent. The decision, made during the May 15-16, 2023 meeting, was driven by concerns over persistently high inflation and the fragility of the country’s economic growth. The committee also took into account risks and vulnerabilities in the financial sector.

The MPC’s decision was based on the projection that inflation would remain above the target range of 6-8 percent in the foreseeable future. Despite a marginal decline in the first quarter of 2023, inflation has remained elevated, largely due to factors such as strong regional demand for maize grain and meal and the depreciation of the Kwacha against the US dollar. Additionally, delays in external debt restructuring negotiations, tighter global financial conditions, and the prolonged Russia-Ukraine war have contributed to upside risks to the inflation outlook.

The Kwacha experienced significant depreciation against the US dollar in the first quarter of 2023, declining by 16.8 percent. This depreciation was driven by excess demand, adverse market sentiments related to external debt restructuring negotiations, and tighter global financial market conditions. However, in April, the Kwacha appreciated by the same percentage due to improved supply of foreign exchange, mainly from quarterly corporate tax obligations and positive market sentiments following the Staff-Level Agreement on the first review of the International Monetary Fund Extended Credit Facility (IMF ECF) arrangement. Nonetheless, pressures in the foreign exchange market have resurfaced, primarily driven by excess demand from various sectors, including wholesale and retail, financial, and electricity, gas, and water supply.

The current account deficit narrowed in the first quarter of 2023, reflecting reduced deficits in both the primary income and services accounts. The reduction in the primary income deficit was attributed to lower investment income, while the narrower services account deficit was due to reduced expenditure on transportation. In the medium term, the current account balance is expected to rebound and post a surplus as global growth recovers, supported by a rise in exports relative to imports.

Credit growth in the country slowed down in March 2023, primarily driven by reduced lending to the government. However, credit to the private sector continued to grow, indicating ongoing economic activity. Money supply expanded due to increased credit to the private sector and valuation effects related to US dollar-denominated credit. The Zambian economy is projected to experience a slowdown in 2023 but rebound in 2024, supported by the recovery of the agriculture and mining sectors, as well as sustained growth in other sectors such as information and communications, manufacturing, transport, and financial and insurance.

The MPC’s decision to raise the Monetary Policy Rate to 9.50 percent aims to address the persistently high inflation and fragile growth in Zambia. The committee emphasized the importance of observed budgetary discipline, fiscal consolidation measures, and broader economic reforms outlined in the Eighth National Development Plan (8NDP) in achieving lower inflation and macroeconomic stability.

The Bank of Zambia will closely monitor inflation outcomes, forecasts, and risks associated with financial stability and external debt restructuring in its future MPC meetings. The next meeting is scheduled for August 21 and 22, 2023.


  1. Why does the BOZ mimick every move that the South African Reserve Bank does? No wonder Tito Mboweni always had a hand in our appointments

  2. Higher interest rates. Hopefully even savings interest will be hiked just as borrowed interest will be.

  3. We need to see a corresponding increase in saving deposit rates, in other countries once the monetary rate is raised they also raise depositor interest rates as well as increase the rates of government securities/ bonds such as Treasury Bills and Promisory Notes. But here in Zambia it appears that isn’t the case, BOZ and these commercial banks must stop taking people for granted. How else can we develop this nation if they the commercial banks are not passing on such cushioning measures to the depositors, they only pass on the bad effects and never the good ones.

    • If we are to encourage more Zambians to deposit, hence reduce inflation the banks and BOZ must be encouraged to increase savers deposit interest rates of fixed deposit accounts and govt securities, that is how a good economy works.

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