THE Bank of Zambia has hiked its policy rate as efforts are sought to resist surging inflation without harming the country’s fragile economic recovery.
Bank governor Christopher Mvunga reiterated that the adjustment had been necessitated by escalation in inflationary pressures, which are pushing inflation away from the upper bound of the 6-8% target range.
Reuters reported that Mr Mvunga said the monetary policy committee had held a “difficult and complex discussion” before settling on a 50 basis point hike.
“We can’t let inflation run away, neither can we stifle economic growth,” he told journalists during a briefing in Lusaka yesterday.
He added, “We had to get into the middle of the road.”
Mr Mvunga added that the decision balances the need to contain rising inflation and anchor inflation expectations against the efforts made to support financial system stability and growth to ensure that inflation remains well anchored in the medium-term is essential to moderate fragilities in the financial sector and support economic recovery.
The BoZ chief added that the implementation of a strong fiscal policy adjustment, whose key parameters are clearly outlined in the Government’s Economic Recovery Programme, is critical in restoring macroeconomic stability”.
The central bank said it was ready to tighten further to tame rising consumer inflation driven by “cost-push” pressures and a sharp deprecation in the local currency.
“The bank of Zambia stands ready to further tighten monetary policy,” Mr Mvunga said at a news conference.
On the country’s debt restructuring, the central bank chief said government was having “cordial discussions” with the International Monetary Fund (IMF).
Zambia became Africa’s first pandemic-era sovereign default late last year. It has requested a restructuring of its debt under a new framework supported by the Group of 20 major economies