BOZ leaves policy rate unchanged, prices -in inflationary pressure

The Central Bank in Africa’s second largest copper hotspot has held interest rates unchanged at 9.75%, this was announced by Dr Denny Kalyalya in Lusaka on 16 May. The BOZ monetary policy committee commenced deliberations on Monday 12 May and the rate decision was announced today. This is the first time in 15 months the BOZ has held rates after an aggressive expansionary monetary policy that saw the MPR cut by 575bps to 9.75%. The BOZ weighed the risks posed by the rising non-performing loans in the industry against the need to grow the economy to levels targeted however being alive to the risks to inflation in the medium term which could come from a rise in fuel prices given that crude is ambitiously pointing north to USD80/bbl. Zambia as a net importer then is vulnerable to commodity shocks given that the Kwacha has depreciated to USD9.9/USD levels. Liquidity spreads above BPR have remained fairly wide which is still a source of concern for the regulator that still bemoans the high interest rates in the industry.

Zambia is projected to grow at a pace of just under 5% with key drivers being increased mining productivity which is expected to compensate the shrink in agriculture due to the lower than usual forecast in this year’s season.

“We saw this coming and our pre-analysis was a tight call to gravitate between a modest rate cut and keeping the rate unchanged, it is an expected outcome and are happy that the decision shows the regulator had priced in inflationary pressures and above all autonomy in such a tight call,” Business Times Strategist said on the sidelines of the rate announcement at Bank of Zambia offices in Lusaka.