BoZ Governor Reports Inflation Stability and Stronger Economic Outlook for 2026
The Governor of the Bank of Zambia, Dr Denny H. Kalyalya, says Zambia’s economy is showing signs of stability, with inflation now firmly within the 6–8 per cent target band and supporting a positive outlook for 2026.
Presenting the Q1 2026 Budget and Economic Performance Outlook, Dr Kalyalya noted that annual inflation currently stands at 7.1 per cent, driven largely by exchange rate movements and fluctuations in food supply, including beef, poultry, fish, vegetables, and maize.
He said inflation is expected to remain within the target range over 2026 and 2027, supported by a more stable exchange rate, improved food supply conditions, and easing non-food price pressures.
Dr Kalyalya highlighted that key risks to the outlook include potential global oil price shocks, particularly following geopolitical tensions in the Middle East, which have pushed crude oil prices above US$100 per barrel.
However, he noted that domestic fuel price increases have been partially contained through fiscal measures such as suspension of excise duty and zero-rating of VAT on fuel.
On exchange rate developments, he reported that the Kwacha had appreciated by 13.1 per cent year-to-date as of April 2026, supported by increased foreign exchange inflows from the mining sector and foreign financial institutions.
He further observed that gross international reserves had risen to US$6.0 billion, providing over five months of import cover, underpinned by foreign exchange purchases by the Bank of Zambia, IMF disbursements, and World Bank project inflows.
Dr Kalyalya also noted a narrowing current account deficit in 2025, driven by strong export performance, particularly copper, alongside increased non-traditional exports.
He said domestic credit growth had moderated, reflecting loan repayments in key sectors, while interest rates had generally declined due to improved liquidity conditions, although lending rates remained relatively high.
On financial sector reforms, the Governor highlighted recent legislative developments, including the enactment of the Banking and Financial Services Act, the National Payment Systems Act, and the Zambia Deposit Insurance Protection Act, which are expected to strengthen financial stability and promote innovation.
He also confirmed the successful rollout of the new Heritage currency series, noting that 97 per cent of old banknotes had been withdrawn from circulation.
Dr Kalyalya concluded that Zambia’s macroeconomic fundamentals are improving, but stressed the need for continued policy discipline, structural reforms, and strong coordination between fiscal and monetary authorities to sustain growth and protect gains achieved.
