July 15, 2014 / 2:33 PM / 6 years ago

UPDATE 1-Zambian FX measures temporary - central bank

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LUSAKA, July 15 (Reuters) - Zambia’s central bank said on Tuesday that measures introduced last month to stabilise the kwacha were only temporary and would be withdrawn “in a measured way” once policymakers saw that the threat of inflation was easing.

In June, the bank increased its overnight lending rate for commercial banks to 10 percentage points above the benchmark policy rate from 6 percentage points in what analysts said was another bid to prop up the sliding kwacha.

It also widened the scope of statutory reserve requirements for commercial banks.

The tightening ended a five-month decline in the kwacha, which rallied from a record low of 7.25 to the dollar in late May to around 6.10 this week, but business leaders complained about the impact of sharply higher borrowing costs.

The bank noted that interest rates had risen but stressed the need to keep inflation in check.

“It was our view that the measures we have taken to restore stability in the financial sector are temporary and will be scaled back when it gets more evident that the threats to higher inflation have receded,” it said in a statement.

“This will be done in a measured way to ensure that we do not see a return to instability in the financial markets that we witnessed earlier in the year.” (Reporting by Chris Mfula; Writing by Ed Cropley; Editing by Ed Stoddard)

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