Zambia raises key rate again with inflation well above target

By Chris Mfula

LUSAKA (Reuters) -Zambia’s central bank raised its benchmark lending rate to 11% from 10% on Wednesday as it fights inflation which has risen well beyond its 6%-8% target range.

The Bank of Zambia has now raised its key rate four times this year to curb inflation, which climbed to 12.6% year-on-year in October from 12.0% in September.

At a press conference after the policy decision, central bank Governor Denny Kalyalya said that inflationary pressures were expected to intensify over the period covering the fourth quarter of 2023 to the third quarter of 2025.

On the Zambian kwacha, which has been hitting repeated record lows this month, Kalyalya said delays in restructuring the country’s debt had affected foreign currency flows the bank was expecting.

Zambia suffered a setback in its debt restructuring efforts earlier this week after the government said a revised deal to rework $3 billion of Eurobonds could not be implemented due to objections from official creditors including China.

The International Monetary Fund’s mission chief for Zambia said this week that further monetary policy tightening may be needed to contain price pressures.

(Reporting by Chris Mfula; Writing by Bhargav Acharya; Editing by Alexander Winning and Emelia Sithole-Matarise)