Zambia Bucks Global Trend, Delivers Deepest Rate Cut in 15 Years

Zambia’s central bank cut interest rates by the biggest margin since at least 2012 as inflation is forecast to remain within its target range.

The monetary policy committee lowered the benchmark interest rate to 10.75% from 13.25%, Governor Denny Kalyalya told reporters in the capital, Lusaka, on Wednesday. That was the fourth successive rate cut.

The MPC cut rates as inflation has been coming down and projections show it will remain within the central bank’s 6% to 8% target band into 2028, helping support economic growth, Kalyalya said.

Inflation slowed to 6.1% in September from 6.2% the prior month. It is seen averaging a percentage point lower at 6.7% in 2026 and 6% next year, respectively, than previously forecast before edging up slightly to 6.3% in the first half of 2028, the governor said.

Factors underpinning the outlook include anticipated stable grain prices and the kwacha’s almost 13% appreciation against the dollar, which has yet to fully seep into prices, he said.

Even so, the risks to the outlook remain to the upside because of an expected super El Niño weather pattern and the protracted conflict in the Middle East, Kalyalya said.

The continued standoff between the US and Iran that’s restricted energy supplies through the Strait of Hormuz has led oil prices to spike past $100 a barrel this month from around $90 a barrel at the end of August, while the Zambian government’s moratorium on fuel taxes and zero rating on value-added tax expires Sept. 30.

Zambia Delivers Jumbo Interest-Rate Cut

Africa’s second-largest copper producer joins a small group of economies such as Nigeria, Zimbabwe and Angola in lowering borrowing costs since US-Iran hostilities flared in late August. Most other central banks are increasing rates or leaving them unchanged.

International reserves climbed to $6 billion at the end of July, enough to cover 4.5 months of imports, from $5.8 billion end-June, Kalyalya said. The increase was mainly attributed to mining taxes and project inflows.

Despite the growing risk from El Niño and continued uncertainty surrounding the Middle East war, domestic growth prospects remain favorable, Kalyalya said. The economy is forecast to expand 5.3% this year, 6% in 2027 and 7.1% in 2028 supported by the mining and agriculture sectors.

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