LUSAKA, Aug 14 (Reuters) – Zambia’s central bank kept its benchmark lending rate unchanged on Wednesday, saying that although inflation remained high its stance was appropriate given the economic impact of a severe drought.

The decision to hold the Monetary Policy Rate at 13.50% follows six successive meetings at which it was raised. So far this year the Bank of Zambia has implemented a 100 basis point hike in May and a 150 basis point increase in February.

“While actual and projected inflation remain elevated relative to the 6%-8% target band, the committee judged that the current monetary policy stance is appropriate,” central bank Governor Denny Kalyalya told a news conference.

Inflation has been rising since the middle of last year, reaching 15.4% year on year in July, fuelled by a slide in the kwacha currency and the worst drought in the southern African region in decades.

The central bank now anticipates inflation will average 15.3% in 2024, up from the 13.7% forecast it gave at its last policy meeting in May.

Kalyalya said the completion of Zambia’s external debt restructuring and implementation of structural reforms remained critical to lower inflation.

Weighed down by delays in restructuring talks and limited foreign-currency inflows, the kwacha hit repeated record lows against the dollar from November to February and has been highly volatile since.

“In taking the decision to maintain the Policy Rate as opposed to raising it, the committee also took into account the impact on the stability of the financial system and growth, particularly in 2024, in the wake of the drought,” Governor Kalyalya said.

(Writing by Bhargav Acharya; Editing by Alexander Winning and David Holmes)