Kwacha Strength and Record Reserves Drive BoZ Rate Cut

The Bank of Zambia has lowered the Monetary Policy Rate to 13.25 percent from 13.50 percent, with Governor Dr Denny Kalyalya pointing to a sharply stronger Kwacha and record foreign exchange reserves as central to the decision.

The Kwacha appreciated by 14.8 percent against the US dollar in the first quarter of 2026, lifted by robust inflows from the mining sector and foreign financial institutions. That currency strength has fed directly into the disinflation story, with headline inflation falling from 11.2 percent in December 2025 to 7.1 percent in March 2026.

Foreign exchange reserves climbed to US$6.2 billion by the end of the quarter, a historic high for Zambia. The Government has also continued to build its gold position, with holdings now at roughly 3,380 thousand kilograms valued at US$509 million, adding a further buffer to the external position.

Dr Kalyalya said the inflation outlook is projected to remain within the 6 to 8 percent target band over the next eight quarters. He noted that improved electricity supply, an expected favourable maize harvest and the stable currency are reinforcing business conditions, though upside risks from the Middle East conflict continue to warrant close monitoring.