• The Committee considered the sharp deceleration in inflation in the second quarter of the year.
• Inflation is projected to decline to averages of 11.4% and 8.4% in 2022 and 2023 respectively.
• The Committee, however, noted upside risks to the inflation outlook that include persistently elevated energy prices.

Bank of Zambia has maintained the Monetary Policy Rate (MPR) at 9.0 percent for the third time this year.

Speaking at the 3rd Monetary Policy Committee (MPC) briefing, Bank Governor Dr. Denny Kalyalya said the decision to maintain the MPR was arrived at following the sharp reduction in inflation rate in the second quarter of 2022.

Dr. Kalyalya stated that the Bank’s projection indicates further decline in inflation rate into the 6-8 percent target range during the first quarter of 2024.

He said inflation is projected to decline to averages of 11.4% and 8.4% in 2022 and 2023 respectively, from the outturn of 22.1% in 2021.

“Sustained implementation of fiscal consolidation and structural reform measures, supported by the Extended Credit Facility from the International Monetary Fund, are among the key factors expected to contribute to lower inflation.”

“The Committee, however, noted upside risks to the inflation outlook that include persistently elevated energy prices, higher than expected maize prices, adverse weather conditions, tight global financial conditions, and weak demand as well as supply chain disruptions that could stem from Covid-19 containment measures,” Dr. Kalyalya said.

Dr. Kalyalya noted that in the second quarter of 2022, inflation declined for the third consecutive quarter to an average of 10.5% from 14.1% in the previous quarter.

“Dissipation of base effects to prices of chicken and charcoal, appreciation of the Kwacha against the US$ and improved supply of vegetables accounted for the decline,” he stated.

He further noted that there is elevated tightness in the local liquidity market because according to Minister of Finance, some resources that were allocated to certain projects have not been utilized fully.
“In June, domestic credit growth slowed to 6.8%, year-on-year, compared to 11.5% in March. This was largely attributed to the reduction in lending to Government and contraction in private sector credit.”

The Central Bank Governor also said the economy is projected to expand by 3.1 percent, 4 percent, and 4.1 percent in 2022, 2023 and 2024 respectively and growth over the period is expected to come from sectors such as the financial and insurance, information and communications, wholesale and retail trade, as well as mining among others.

He further reiterated that Gross international reserves marginally increased to US$3.0 billion, representing 3.7 months of import cover, US$9.8 billion of imports at the end of June, 2022 from US$2.9 billion, 3.6 months import cover; US$9.4 billion of imports, at the end of March.