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UPDATE 1-Zambia central bank holds rates, reserves boosted by IMF drawing rights

reuters.com · 09/01/2021 05:20
UPDATE 1-Zambia central bank holds rates, reserves boosted by IMF drawing rights

Adds details

By Chris Mfula

- Zambia's central bank left its benchmark interest rate unchanged at 8.5% on Wednesday, and the bank's governor said tougher fiscal discipline and concluding an agreement on an IMF lending programme were critical for economic stability.

Zambia, Africa's second-biggest copper producer, became the continent's first pandemic-era sovereign default in November after failing to keep up with international debt servicing payments.

Christopher Mvunga told a news conference the country's international reserves had risen to $2.9 billion at the end of August, boosted by an allocation of IMF special drawing rights (SDR).

Mvunga said an IMF programme remained critical for Zambia to achieve macroeconomic stability, adding that gross domestic product was projected to grow 1.6% this year and that inflation was decelerating faster than earlier projected as the exchange rate stabilised.

"Uncertainty surrounding the emergence of more contagious COVID-19 variants remains a key downside risk to the growth outlook," he told reporters after a two-day monetary policy committee meeting.

The southern African country's new finance minister has pledged to conclude talks with the IMF on a lending programme by next month, as he seeks to pull Zambia out of its protracted debt crisis. nL8N2PY238

"Although the allocation of SDR resources is expected to ease financing pressures, it is imperative that an immediate and stronger fiscal adjustment is implemented to create the much needed fiscal space in order to restore macroeconomic stability," Mvunga said.

Mvunga said that besides securing an IMF programme, external debt restructuring and achieving a sustainable budget balance remained critical to improving the country's economic stability.

(Reporting by Chris Mfula, Writing by Alexander Winning and MacDonald Dzirutwe; editing by John Stonestreet)

((alexander.winning@tr.com; +27 10 346 1076))