Africa-Press – Malawi. The Bank of Zambia has increased the Monetary Policy Rate -MPR- from 12.5 percent to 13.5.
The decision will affect both lending and borrowing rates in the financial market, but as well reduce the quantity of money in circulation in the economy.
Announcing the increase today in Lusaka, Central Bank Governor, DENNY KALYALYA said the decision is to limit the forecast persistent rise in inflation as well as depreciation of the kwacha.
He explained that inflation currently stands at 13.8 percent, and the bank has forecast persistent rise averaging 13.7 percent for the rest of the year, and if nothing is done, macro-economic stability will be undermined.
Dr KALYALYA added that the central bank has also forecast that inflation will continue to increase, moving too far away from the target range of 6 to 8 per cent, as stated in the national budget.
He further explained that inflation has been driven by rising prices of food items, such as maize, vegetables, but as well non-food items, such as energy prices.
And Dr. KALYALYA said the kwacha has again started experiencing pressure, leading to its depreciation against the dollar, which he says is due to less supply than demand.
He explained that there is continued high demand for the dollar on the market, because of various factors, which include the country’s need to import both food and electricity.
Dr. KALYALYA disclosed that in the first quarter of this year alone, the kwacha depreciated by 10.6 percent, therefore the need to raise the MPR, which will moderate demand for the dollar.
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