• The decision was underpinned by the projection that inflation will increase and remain above the target range.
• Inflation continued to decline in the fourth quarter of 2022.
• In 2024, inflation is forecast to average 10.1 percent.

Bank of Zambia’s Monetary Policy Committee has raised the Monetary Policy Rate by 25 basis points to 9.25 percent from 9.0 percent.
Speaking at the quarterly media briefing, Bank Governor Denny Kalyalya revealed that the decision was underpinned by the projection that inflation will increase and remain above the target range of 6 to 8 percent in the first quarter of 2024.
Dr. Kalyalya stated that the rise in the Monetary Policy Rate will not affect the financial sector to an event where it becomes unstable.
He noted that Inflation continued to decline in the fourth quarter of 2022, although at a slower space as it fell to 9.8 percent from 9.9 percent in the third quarter.
“In January 2023, inflation declined further to 9.4 percent from 9.9 percent in December 2022. This follows dissipation of base effects across a number of items in the Consumer Price Index basket,” Dr. Kalyalya noted.
He further revealed that inflation is projected to increase and remain above the target range of 6 to 8 over the forecast horizon, contrary to November 2022 projections that showed that the rate would return to the target range in the first quarter of 2024.
Dr. Kalyalya added that inflation is projected to average 11.1 percent in 2023 compared to the November 2022 projection of 8.5 percent due to anticipated rise in electricity tariffs, and depreciation of the Kwacha among other factors.
“In 2024, inflation is forecast to average 10.1 percent. The factors underlying the forecast include the recent rapid depreciation of the Kwacha against the US dollar, the anticipated increase in electricity tariffs to cost reflective levels, and the possible reduction in maize production due to among other factors adverse weather conditions and crop infestation by Fall Armyworms.”
“Further, the continued global financial conditions and negative sentiments arising from the protracted debt restructuring negotiations and more so the uncertainty over the treatment of the non-resident holders of Government securities, working through the exchange rate channel are projected to add elevated inflationary pressures. The foregoing factors remain potential upside risks to the inflation outlook,” he stated.
He also disclosed that the Kwacha depreciated by 4.3 percent against the United States dollar to an average of K16.71 in the fourth quarter of 2022, after a cumulative appreciation of 10 percent in the previous quarters.
Dr. Kalyalya stated that the Kwacha’s depreciation trend has persisted in 2023 with the currency trading at K19.33 per US dollar as at 14th February, 2023.
He attributed the Kwacha’s volatility to low foreign exchange supply particularly from the mining sector, amidst high demand by market players for various purposes, including imports of fuel, medicine and agriculture inputs, among others.
“In an effort to stabilize the foreign exchange market, the Bank augmented its support and provided US$443.5 million, largely from mining tax receipts, compared to the provision of US$333.5 million in the third quarter. However, Gross international reserves held steady at US$3.1billion, while import cover increased to 3.8 months at the end of December 2022 from 3.5 months at end of September 2022.The improvement in import cover followed the downward revision of prospective imports.”
On 1st February 2023, the Central Bank raised the statutory reserve ratio on commercial banks’ deposit liabilities by 2.5 percentage points to 11.5 percent as an additional measure to minimize exchange rate volatility.