BoZ raises policy rate to a record 15.5%

The Bank of Zambia (BOZ) has raised the policy rate to 15.5% from 12.5% with immediate effect in an effort to curb soaring inflation which hit double digits in October.

Speaking during a quarterly media briefing in Lusaka today, BOZ Governor Denny Kalyalya says to allow for better functioning of the credit market, the monetary policy committee also decided to lift the caps on lending rates.

Dr. Kalyalya explains that in arriving at the decision, the committee took into account inflationary developments in the third quarter and the inflation overturn of 14.3% in October 2015.

He says the October overturn has pushed inflation into double digits largely reflecting the sharp depreciation in the exchange rate as witnessed in recent months.

He notes that the Zambian economy is currently facing significant challenges which have been compounded by domestic shocks related to significant reduction in energy supply, fiscal pressures and adverse sentiments.

Dr. Kalyalya however, points out that the committee is cognizant of the urgent need to diversify the economy, and that this will require measures to support investment and growth in key sectors such as agriculture, energy and manufacturing.

He adds that monetary policy coupled with fiscal consolidation will be critical in anchoring macroeconomic stability.

Dr. Kalyalya adds that the fiscal deficit target for 2016 of 3.8% of GDP announced by the Finance Minister in his 2016 budget address to Parliament represents a significant step towards anchoring macroeconomic stability.

Meanwhile the Bank of Zambia has announced that the new bank notes with features to enable the visually impaired feel the notes are now in circulation.