Lydia Tembo
The Bank of Zambia (BOZ) has raised its Monetary Policy Rate (MPR) by 50 basis points to 14% from 13.5%. According to Central Bank Governor Danny Kalyalya, the increase aims to curb inflation exceeding the 6-8% target band.Dr. Kalyalya stated that the decision aims to steer inflation back toward the target band while anchoring inflation expectations. He explained that inflation outlook risks remain skewed upward, driven by higher maize grain prices and persistent exchange rate depreciation.Key drivers of inflation include:• Low maize, fish and vegetable supply• Increased solid fuel demand due to electricity load management• Kwacha depreciationIn arriving at the decision Dr. Kalyalya said “the Committee also took into account: (i) complementary liquidity management measures under consideration; (ii) foreign exchange market reforms underway; (iii) the fragility of the economy in the wake of the severe impact of the recent drought; and (iv) the stability of the financial system.”Meanwhile the central bank forecasts inflation to surge to 13.9% in 2025, surpassing the 12.7% projected in the August MPC Statement. This significant increase is primarily driven by the exchange rate depreciation and rising electricity tariffs, exacerbated by drought-related disruptions to electricity generation.Looking ahead, inflation is expected to ease to 9% in the first three quarters of 2026, although still above the 6-8% target range.And Dr. Kalyalya states that the drought has significantly impacted Zambia’s economy, revising the real GDP growth projection for 2024 downward to 1.2% from the initial 2.3% forecast in July. 
