On Wednesday, the Bank of Zambia cut its key interest rate for the first time in more than two years to counter the impact of the Coronavirus on the economy, even as inflation surged to a 43-month high in April. The Monetary Policy Committee reduced the rate to 9.25% from 11.5%, Governor Denny Kalyalya stated. It’s the biggest cut since the benchmark policy rate was introduced in March 2012. “With COVID-19, the already challenged domestic macroeconomic environment has worsened. Fiscal pressures are expected to heighten in 2020 as revenue performance is adversely affected by COVID-19, while spending to combat the virus rises,” bank governor Denny Kalyalya told a media briefing. The cut should help cushion the economy of Africa’s second-largest copper producer, which the central bank projects will contract by 2.6% this year. Gross domestic product expanded by 1.9% in 2019. The Bank of Zambia has provided a 10 billion Kwacha ($550 million) credit line to lenders that may face liquidity challenges for lending to small and medium-sized business affected by the pandemic. Zambia has to date recorded 920 cases and seven deaths.
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