(Ecofin Agency) - For the first time since 2015, Zambia central bank has raised its benchmark rate by 50 basis points to 10.25%. This was revealed by the bank’s governor Denny Kalyalya (photo) during a press conference on May 22, 2019.
The new measure is aimed at supporting macroeconomic stability and controlling the inflation caused by the decrease in corn production, a rise of budget deficit (7.5% of GDP in 2018), an increase in public debt and a decrease of foreign reserves.
To benefit from an IMF support program, the country is striving to reduce its debt burden, which reached $10.05 billion at end 2018. In that regard, various austerity measures were announced by authorities to reduce the government’s spendings.
It is also trying to boost its revenues by increasing taxes and duties levied on mining firms. This increase has however created a crisis that may affect the sector’s performances. According to Denny Kalyalya, this crisis directly affects the economy. He, therefore, invites the government and mining industries to reach an agreement.
Let’s note that for the next eight quarters, the central bank will forecast yearly inflation above the 6-8% mark.
Moutiou Adjibi Nourou