Zambia Urges Less Panic on Kwacha With Scott Wary of Rate RisesMatthew Hill
Zambia, which last month raised interest rates to halt a slide in Africa’s worst-performing currency this year, said it’s hesitant to go too far with increasing borrowing costs as it pledged direct intervention in foreign-exchange markets.
“We are reluctant to overdo it in terms of putting up interest rates,” Vice President Guy Scott told lawmakers today in remarks broadcast on the parliamentary radio service. “On balance I wouldn’t panic too much” about the currency’s retreat, he said.
The Bank of Zambia raised its benchmark lending rate by a record 50 basis points, or 0.5 percentage point, to 10.25 percent on Feb. 28. The kwacha’s 7 percent drop against the dollar this year increases inflation risks in the country that vies with Democratic Republic of Congo as Africa’s biggest copper producer, which imports items from oil to clothing.
The central bank will pursue a flexible exchange-rate policy and will intervene directly “in response to disorder and panic among market participants,” it said in a statement yesterday. The currency gained for a second day, the longest streak since Jan. 15, advancing 0.6 percent to 5.9523 per dollar by 10:13 a.m. in Lusaka. That pared its seventh straight weekly decline to 2.3 percent.