• Monetary Policy Rate will be adjusted upwards.
• This is to restrict the amount of Kwacha in circulation.
• The cost of borrowing will also increase and a lot of stakeholders will not be borrowing.

An Economist says the Bank of Zambia (BoZ) might slightly adjust the Monetary Policy Rate (MPR) upwards in order to restrict the amount of Kwacha in circulation.
Mambo Phiri told Money FM News in an interview that the interest rate may be increased from the current 8.5 percent to 9 or 10 percent because of the inflation rate which is still high at 24.4 percent.
He said the Central Bank might slightly increase the MPR in a bid to control the inflation rate, and in turn stabilize commodity prices.
“I believe the Central Bank’s Monetary Policy Committee will propose that the Monetary Policy Rate be adjusted upwards somewhere like 9 to 10 percent so that they restrict the amount of Kwacha in circulation, because currently we have a situation where inflation has reached its highest level at 24.4 percent,” Mr. Phiri stated.
And Mr. Phiri noted that due to high investor confidence in the country’s economy, major indicators such as the exchange rate has been performing very well with regards to foreign convertible currencies.
He observed that United States Dollar, Egyptian Pound and South African Rand’s performance against the Kwacha have strengthened.
“Looking at the current macro-economic outlook, it gives us confidence especially when you look at some of the major indicators such as inflation and also the exchange rate. We have seen due to investor confidence that the exchange rate has been performing very well with regards to the foreign convertibles.”
Meanwhile, Mr. Phiri said once the Rate is adjusted upwards, the cost of borrowing will also increase, as a result, a lot of stakeholders will not be borrowing and this might provide stability to the Kwacha.
“We presume that once they adjust it upwards, the cost of borrowing is going to increase, and a lot of stakeholders won’t be borrowing and this might provide that stability to the Kwacha to make sure that it gains further against other foreign convertibles,” he said.
In May 2021, Bank of Zambia maintained its Monetary Policy Rate at 8.5 percent due to continued inflationary pressure in the economy, and the Bank is expected to announce the Monetary Policy Rate for this quarter on Wednesday this week.