Zambia Interest Rate2021 Data | 2022 Forecast | 2001-2020 Historical | Calendar

The central bank of Zambia left its key interest steady at 8.5 percent on September 1st, to support financial stability and growth, allowing the last rate adjustment to take full effect on the economy. The real GDP is projected to grow by a modest 1.6 percent in 2021 and strengthen over the medium-term, while the inflation rate is expected to decelerate faster than earlier projected but to remain above the 6-8% target range over the next eight quarters. Inflation is estimated to average 22.6 percent, 15.5 percent and 11.9 percent in 2021,2022, and the first half of 2023, respectively. Finally, the bank's governor said an agreement on an IMF lending programme and stronger fiscal adjustment remained critical for Zambia to restore macroeconomic stability. Zambia failed to keep up with international debt servicing payments in November, becoming the first African nation to default on its debt in the pandemic-era.

The Central Bank of Zambia left its key interest rate steady at 8.5% at its May 2021 meeting, to support financial stability and growth, allowing the last rate adjustment to take full effect on the economy. The real GDP is seen recovering faster than earlier projected on the back of strong performance in information & communication, electricity, education and public administration. The inflation should remain above the upper bound of the 6-8% target range over the next eight quarters, but inflationary pressures are now expected to subside more quickly than envisaged in February's meeting on account of a good crop harvest, higher copper prices and improved external financing. Inflation is estimated to average 21.9% and 16.7% in 2021 and 2022, respectively. Finally, the Bank stressed that the implementation of fiscal adjustment measures in line with the Economic Recovery Programme and understandings reached in discussions with the IMF remain critical to anchor macroeconomic stability.

The Central Bank of Zambia raised its key interest rate by 50 bps to 8.5% at its February 2021 meeting, to anchor inflation expectations and restore macroeconomic stability. It was the first rate increase since November of 2019, amid rising inflationary pressures, which are pushing inflation further away from the upper bound of the bank's 6-8% target range. The risks to the inflation outlook are assessed to be tilted to the upside and inflation is expected to deviate further from the upper bound of the target due to the lagged pass-through from the depreciation of the kwacha and sustained fiscal deficits. Meanwhile, high-frequency indicators of domestic activity point to a less severe contraction in real GDP in the last half of 2020 following the partial relaxation of COVID-19 restrictions. In the medium-term, the economy is projected to recover supported by mining, utilities and information & communication. The bank added it stands ready to further tighten monetary policy if needed.

The Central Bank of Zambia left its benchmark interest rate unchanged at a record low of 8% during its November 2020 meeting, to moderate risks to financial stability and support growth, allowing the previous policy measures taken earlier in the year to be fully transmitted. The economy is projected to shrink 4.2% in 2020 and recover at a weaker pace than earlier anticipated due to limited fiscal space, as well as uncertainty surrounding the persistence of the Covid-19 pandemic and access to external financing. The Committee also noted that inflation rose to 16% in October from 15.7% in September largely reflecting the weakening of the kwacha; and it is seen moderating somewhat but will likely remain above the 6-8% target range until the third quarter of 2022. Zambia became the first African country to default on its Eurobond after it missed an overdue coupon payment of $42.5 million on November 13th.