BoZ Cuts Interest Rates: Relief in Sight for Zambian Households and Businesses

Historic move signals improving economic conditions as inflation continues to fall

The Bank of Zambia has reduced the country's benchmark interest rate for the first time in over five years, a significant development that experts say will bring much-needed relief to Zambian households and businesses struggling with the cost of living.

Bank of Zambia Governor Denny Kalyalya announced on Wednesday that the Monetary Policy Committee has cut the policy rate by 0.25 percentage points to 14.25%, down from 14.5%. This marks the first rate reduction since August 2020, before the country's debt default.

What This Means for You

The interest rate cut is expected to have a direct positive impact on Zambians' daily lives. Lower interest rates typically mean cheaper loans for businesses and consumers, which could translate into more affordable vehicle financing, reduced mortgage costs, and lower interest payments on personal loans.

"The rate reduction is likely to have a ripple effect on the country's financial sector, influencing lending conditions and potentially leading to increased spending and investment," Governor Kalyalya explained during the media briefing.

For small business owners, the move could mean easier access to capital for expansion and operations. For families, it may offer breathing room in managing household debt and could encourage banks to offer more competitive rates on loans.

Inflation Finally Coming Down

The rate cut comes as welcome news amid falling inflation rates. Consumer prices, which have been a major burden on Zambian families, have declined for six consecutive months. Inflation fell to 11.9% in October from 12.3% in September – the lowest level in over two years.

This downward trend means that essential items like mealie meal, cooking oil, and fuel are stabilising in price, with the stronger kwacha and lower fuel costs helping to ease pressure on household budgets.

Governor Kalyalya indicated that inflation is projected to continue falling and may enter the central bank's target range of 6-8% by the first quarter of 2026 – a development that would mark a major turnaround for the economy.

Economic Recovery Gaining Momentum

The interest rate cut signals growing confidence in Zambia's economic recovery following years of financial challenges. The country defaulted on its external debt in November 2020 but successfully negotiated a restructuring deal with creditors last year.

"This decision reflects the continued decline in inflation and the downward trajectory we observed in the third quarter," Kalyalya noted, adding that inflation had dropped from 14.1% in June to 12.3% in September before reaching the current 11.9%.

The central bank's move aligns Zambia with other African economies including Nigeria, South Africa, Ghana, Egypt, and Kenya, which have also eased monetary policy in 2025 as inflationary pressures moderate across the continent.

Cautious Optimism Ahead

While the rate cut is a positive step, experts caution that Zambia's heavy reliance on copper mining and exposure to global commodity price fluctuations mean the central bank must maintain a careful balance between supporting growth and keeping inflation under control.

For now, however, the message is one of cautious optimism: after years of economic hardship, Zambian families and businesses can look forward to gradually improving conditions, with lower borrowing costs and more stable prices offering hope for a brighter financial future.

This version emphasises the practical impact on ordinary Zambians while maintaining the key facts and positive economic trajectory.