LUSAKA-(MaraviPost)-The Bank of Zambia has cut its benchmark interest rate by 250 basis points to 10.75%, signaling growing confidence in the country’s disinflation path and a shift toward supporting economic growth.
The decision was taken by the Monetary Policy Committee (MPC) at its meeting held September 28-29, 2026, Governor Dr. Denny Kalyalya announced at a press briefing at the Bank in Lusaka on Tuesday, September 30.
Kalyalya said the Committee’s decision reflected an inflation outcome and forecast that are lower than previously projected, even after factoring in identified upside risks. The cut is intended to align the policy stance with the improved inflation outlook while lowering the cost of finance for the broader economy.
“The decision reflects the need to align the monetary policy stance with the improved inflation outlook and is supportive of the lower cost of finance for the broader economy, and ultimately economic growth,” Kalyalya said.
The move marks a significant easing after a prolonged tight stance aimed at containing price pressures and stabilizing the kwacha.
Analysts say the 250-basis-point cut is the largest in recent years and could spur lending to the private sector, particularly in agriculture, manufacturing and small businesses that have faced high borrowing costs.
The central bank stressed that future policy decisions will continue to be guided by inflation outcomes, forecasts and risks, including those linked to financial stability.
The MPC is scheduled to meet next on November 25-26, 2026, when it will review whether the easing cycle can be sustained amid global commodity price volatility and domestic fiscal pressures.
Zambia’s inflation has moderated in recent months on the back of improved food supply, a relatively stable exchange rate and tighter fiscal management, giving the Bank room to pivot toward growth support.
Kwacha Depreciates 5.6% in Q3
Meanwhile, the Zambian Kwacha depreciated by 5.6% against major currencies in the third quarter of 2026, Dr. Kalyalya has disclosed.
The Governor attributed the depreciation to a combination of external and domestic pressures, including subdued foreign exchange inflows, strong demand for dollars to finance imports, and global market uncertainty weighing on emerging market currencies.
Despite the weakening, Kalyalya said Zambia’s foreign exchange market remains orderly, with the central bank continuing to provide support where necessary to smooth excessive volatility without targeting a specific level for the Kwacha.
The 5.6% depreciation comes even as inflation trends have improved, prompting the MPC to ease monetary policy to lower financing costs and stimulate growth.
Economists note the currency pressure could pose a renewed upside risk to inflation if sustained, particularly through higher imported fuel and input costs, a point Kalyalya acknowledged, saying future policy decisions will continue to be guided by inflation outcomes, forecasts and financial stability risks.
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