Decision to maintain Monetary Policy Rate at 14.5%

By Jane Chanda 

Economics Association of Zambia (EAZ) president Oswald Mungule says the Central Bank’s recent decision to maintain the Monetary Policy Rate at 14.5 percent shows its confidence in the current inflation trajectory, allowing the economy to absorb previous tightening effects.

And Economist Jerevas Tembo said Zambia’s promising maize harvest could help achieve the Bank of Zambia (BoZ)’s projected inflation target of 13.8 percent in 2025, citing reduced consumer expenditure due to increased food production.

BoZ recently maintained the Monetary Policy Rate (MPR) at 14.5 percent.

Establishing confidence in the economy is a very positive indicator for stability. Many Zambians had become accustomed to monetary price hikes whenever the Bank of Zambia announced briefings on revising policy rates. This stemmed from the many upward policy rate adjustments which happened within a short space of time. Of course those came with their own negative consequences, mainly with the tightening of liquidity in the country via increased borrowing rates from financial institutions, in corresponding with the increased rate from BoZ.

During the period of unpredictability, many also experienced upwards adjustments in their premiums, particularly those who have been servicing loans.

However, by holding the policy rate steady this time around, it is assumed that the bank has provided a level of predictability for economic agents, thereby supporting business planning and reducing uncertainty in the credit market.

While it was understood that BoZ’s aim for revising upwards was mainly focused on addressing inflation that seemed to be spiraling out of control, the consequences the same brought in the monetary market were dire, especially with the increased borrowing rates in a country where many rely on some sort of borrowing to see them through the month as their salaries are just too little to sustain the high cost of living.

The vibes generally, especially in the past month have been very positive. The Kwacha has shown signs of strengthening against the United States Dollar and other major convertible currencies, inflation eased from16.5 percent in April to 15.3 percent in May 2025, mainly attributed to price movements in both food and non-food items. And a bumper harvest of around 3.6 million metric tones was announced from the 2024/2025 yields.

The question is will the positive trend hold? That is what those in charge of the monetary and fiscal policy will have to work towards in terms of ensuring that there is stability in the macroeconomic environment.