Zambia Interest Rate Increased to 9.5% to Stabilise Inflation

The Bank of Zambia announced yesterday that the key interest rate had been lifted by 25 basis points to 9.5% in order to limit the rate of inflation in Zambia.

The Bank of Zambia said inflation was forecast to remain above the 6-8% target band until the last quarter of 2024. Annual inflation increased from 9.9% in March to 10.2% in April.

The Bank also raised the rate by 25 basis points in February, having remained unchanged for more than a year at 9% since November 2021, to 9.25%.

Zambia has been on a road to recovery since being the first African nation to default on debt in 2021 during the COVID-19 pandemic. A decrease in exports and the unavoidable impact of the pandemic

The New Dawn Government has been proactively seeking to address its debt and resulting exaggerated inflation since being elected into office in August 2021. In August 2022, the government negotiated a 38-month, $1.3 billion loan with the International Monetary Fund.

The deal was made possible by a debt-restructuring agreement that was endorsed by France and China, Zambia’s two largest creditors. Since the deal, further debt restructuring talks have been disappointing in their progress, as rising tensions between China and Western nations have left both sides reluctant to negotiate with the other.