The central bank in Africa’s second largest copper hotspot Zambia has announced a 125bps rate hike on its benchmark interest to 11.5% in a move to curb a sliding currency. Grappling with energy poverty and rising inflationary pressure two day deliberations by the monetary policy committee commenced Monday 18 November into Tuesday with the announcement made by BOZ Governor Dr. Denny Kalyalya today.
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The currency has been on a one way traffic losing streak with a year to date depreciation of 17% given rising dollar demand and asset sell off pressure as sentiment wanes. Zambia’s reserves are at a decade low at just below one and half yards translating to import cover 1.6 months which has incapacitated the central bank from sterilizing the market through offloading dollars.
“The central bank still has latitude to hike rates of 525bps but we can understand that the committee is thinking about private sector growth in a suppressed environment,” Economic think tank National Secretary Mutisunge Zulu said on the side lines.
Barely a week to the MPR meeting the BOZ hiked the overnight lending facility by a thousand basis points to 28% to reign in on inflation. Lending facilities that reference the MPR will now be 1.25% costlier.
The Kwacha Arbitrageur