ZAMBIA’S INFLATION INCREASED BY 13.5%

By Daily News Reporter

Zambia's inflation has risen by 13.5%, driven by the drought and the country's weaker exchange rate. The Bank of Zambia has hiked its interest rate to 2.4% this quarter, the highest consideration in recent years, to stabilize the local currency and arrest the runner-away inflation.

Bank of Zambia Governor Denny Kalyalya has warned that the continued movement of inflation away from the projected 6-8 percent annual target could undermine macroeconomic stability and efforts towards robust and sustained growth.

And the Monetary Policy Committee (MPC) calls for urgent countervailing action to contain persistent inflationary pressures. This has been primarily due to the exchange rate channel and rising inflation expectations. Projections show that inflation may average 9.8% from 9.9% and 7.4% in Q1 2026. The escalation of inflationary pressures during the quarter under review was a factor in the economic downturn induced by a weaker exchange rate and the drought, which weighed on output for firms in manufacturing and agriculture sectors.

Growth prospects for 2024 look gloomy, with projections averaging 2.3% from the earlier projection of 4.4% driven by the expected impact of the current drought, with agriculture and energy being the most adversely affected sectors. There is an increased need for various players-led by the government to work towards redressing the escalating inflation or risk derailing macroeconomic stability.

However, there is hope of economic growth in 2025, though sluggish, with mining companies contributing lower than envisaged mineral royalties. Industrial players attribute the inactivity status at various mining sites to lack of investment to recapitalize operations.

So far the Bank of Zambia has provided market support of $369 million to moderate volatility and broadly support the importation of critical commodities.