By Nicholas Bariyo
KAMPALA Uganda--Zambia's central bank raised its key lending rate for the second time in a row as Africa's second-biggest copper and cobalt producer seeks to tame spiralling inflation, the central bank said Wednesday.
The bank increased the interest rate by 150 basis points to 12.5% from 11% to rein in inflationary pressure, Central Bank Governor Denny Kalyalya said. Inflation rose to 13.2% in January from 13.1% in December, driven by higher corn and fuel prices as well as the depreciation of the local currency against the U.S. dollar.
"To steer inflation towards the target band, and help anchor inflation expectations, the central bank decided to raise the rate," he said. "Decisions on interest rates will continue to be guided by inflation outcomes, forecasts and identified risks."
The rate hike was higher than Oxford Africa Economics' earlier projection of a 100 basis-point increase, as the country grapples with its highest inflation rate in nearly a year. Zambia's local currency has lost about 30% of its value against the dollar since last year, elevating prices in the mineral-rich nation.
Zambia, which became Africa's first pandemic-era sovereign defaulter in 2020, is struggling to resolve a long awaited debt restructuring deal, involving around $16.76 billion in external debt.
But the recent discovery of a huge copper deposit by U.S. start-up KoBold Metals is expected to brighten the country's economic prospects, according to analysts.
Government and company officials believe that the discovery in the Copperbelt province, first announced in early February, could lead to the opening of a 500,000 metric-ton-a-year mine, a potential game changer in the race to secure the supply of metals crucial for the global energy transition.
Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com
(END) Dow Jones Newswires
02-14-24 0805ET
