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Zambia's central bank raises benchmark rate by 50 bps to 10.25%

Zambia's central bank raised its benchmark lending rate by 50 basis points to 10.25% to counter inflationary pressure and support macroeconomic stability, its governor Denny Kalyalya said on Wednesday.

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LUSAKA, May 22 (Reuters) - Zambia's central bank raised its benchmark lending rate by 50 basis points to 10.25% to counter inflationary pressure and support macroeconomic stability, its governor Denny Kalyalya said on Wednesday.

Annual inflation is expected to remain above the bank's 6-8 percent target over the next eight quarters, Kalyalya told journalists.

"Lower maize output, continued elevated fiscal deficits, high debt service payments and a decline in international reserves are among the upside risks to inflation," he said.

Those risks were also contributing to the negative sentiment which was pressuring the kwacha ZMW=, he added.

When asked about the situation at Vedanta-controlled Konkola Copper Mines (KCM), which is facing liquidation, Kalyalya said developments in the mining sector had a bearing on the economy.

He added that he hoped a disagreement with mining companies over a hike in tax bills could be resolved amicably so that the focus can return to production.

Zambia has started to look for a new investor for KCM, President Edgar Lungu said on Monday, in a move likely to stoke international miners' concerns about rising government intervention in the sector.

(Reporting by Chris Mfula; Editing by Kirsten Donovan)

((chris.mfula@thomsonreuters.com;))

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