Zambia Raises Interest Rate to Stabilize Kwacha and Curb Inflation
The Bank of Zambia has raised its base interest rate by 0.5 percentage points, increasing it from 14% to 14.5%, in an effort to stabilize the Kwacha and control inflation.
The decision was announced following the Monetary Policy Committee (MPC) meeting held from February 10-11, with Governor Dr. Denny Kalyalya stating that the move aims to steer inflation back within the target range of 6-8% over the medium term.
“The relatively higher inflation outlook for 2025 is largely driven by recent inflationary pressures and the continued depreciation of the exchange rate,” Kalyalya explained.
A key factor behind rising inflation has been the introduction of emergency electricity tariffs in response to the severe drought affecting Zambia’s hydropower generation. This has significantly impacted non-food inflation, which climbed from 12.2% in October 2024 to 14.1%.
To reduce reliance on hydropower and enhance energy resilience, the government is accelerating projects such as the Maamba Energy Phase II coal-fired plant and ZESCO’s 100MW Chisamba Solar Project.
Despite inflationary concerns, the MPC noted that risks to inflation remain balanced, with potential improvements in food supply and electricity generation expected to ease price pressures in 2025.
