By Angela Moonga
Bank of Zambia (BoZ) Governor Dr Denny Kalyalya says the expected El Nino conditions pose a threat to the country’s agricultural production and electricity generation.
Announcing the new Monetary Policy rate, which has been reduced by 250 basis points to 10.75 percent, Dr Kalyalya warned that while the country’s outlook on inflation and other variables seemed favourable, upside risks remained.
”The expected El Nino conditions going forward threaten agricultural production and electricity generation and could push both food and energy prices prices up,” Dr Kalyalya said.
He also said that protracted conflict in the middle east and geopolitical tension could drive global crude prices higher.
Dr Kalyalya said tightening of the global finan conditions on account of rising inflation could reduce capital flow and exert pressure on the exchange rate in emerging and developing economies.
He said the Bank at the Monetary Policy Committee level decided to reduce the Monetary Policy Rate by 250 basis points to 10.75 percent, by taking into account the inflation outcome and current inflation projection that were lower than previously indicated, as well as the identified upside risks to the latter.
Dr Kalyalya also said that the decision reflected the need to align the Monetary Policy stance with the improved inflation outlook and was supportive of the national growth agenda.
He said inflation that continued to decline to 6.5 percent in June from 7.1% in March, and was now standing at 6.1% in September, well within what he said was the 6.8 percent target band.
Dr Kalyalya attributed the lower inflation to lower maize and grain prices and continued appreciation of the Kwacha, supported by sustained tight Monetary Policy stance and fiscal consolidation.
He said the lower maize prices benefited from a record maize bumper harvest of 4.9 million metric tonnes during the 2025/26 farming season.
He said the Kwacha appreciated on the back of huge export earnings, reinforced by improved foreign exchange liquidity arising from the currency directives issued in December 2025.
”Taking into account the lower inflation outcome, the projection that inflation will remain within the target band over the forecast horizon, and the identified upside risks to the inflation outlook, the committee decided to reduce the Policy Rate by 250 basis points to 10.75%,” said Dr Kalyalya.
