Zambia’s central bank raised the ratio of deposits that commercial lenders must hold in a bid to reverse a slide in the world’s worst-performing currency after Argentina’s peso.
The Bank of Zambia will increase the statutory reserve ratio requirement for local- and foreign-currency deposits by 3 percentage points to 14.5% with effect from Nov. 13, it said in a circular on Monday. The move is aimed at relieving “persistent foreign-exchange market pressure” and reining in inflation, it said.
Zambia’s kwacha has plunged 21% against the dollar since the end of June, with only Argentina’s peso performing worse globally, according to data compiled by Bloomberg.
The copper-producing nation’s currency has taken strain as metal prices and production have dropped, while efforts to restructure more than $10 billion of external sovereign debt have dragged.
Zambian consumer price inflation in October accelerated 12.6% — the fastest pace in almost two years — driven in part by the kwacha’s depreciation. Zambia imports products from fuel to fertilizer, so prices are heavily impacted by movements in the exchange rate.