Zambia’s Inflation Hits 32-Month High Amid El Niño-Induced Drought

BREAKING NEWSAugust 29, 2024 at 11:42 AM UTC

TLDR

Zambia's annual inflation rate hits 32-month high in August due to El Niño-induced drought, leading to a 15.5% increase in consumer prices.
Ongoing drought adversely affects Zambia's economy, causing damage to crops, reduced hydropower generation, costly imports, and a weakened kwacha.
Food prices, making up over half of the inflation basket, rose to 17.6%, while non-food price growth slowed to 12.5%.

Zambia’s annual inflation rate reached a 32-month high in August, driven by an El Niño-induced drought that has sharply increased food prices.

Consumer prices rose 15.5%, up slightly from 15.4% in July, according to Statistician-General Goodson Sinyenga. Month-on-month inflation moderated slightly, with prices rising 0.9% compared to 1% in July.

The ongoing drought has severely impacted Zambia’s economy, damaging crops, reducing hydropower generation, and leading to costly imports that have weakened the kwacha. Food prices, which constitute more than half of the inflation basket, increased to 17.6% from 17.4% in July, while non-food price growth slowed to 12.5% from 12.6%.

Key Takeaways

The drought complicates the central bank’s efforts to bring inflation back within its target range of 6% to 8% by next year. This month, the central bank held its key interest rate at a seven-year high of 13.5% after six consecutive hikes totaling 450 basis points. The bank is also working on measures to limit the use of foreign currency in domestic transactions to support the kwacha. Last week, the energy regulator rejected a proposed 156% increase in electricity tariffs by state power utility Zesco, intended to cover the cost of emergency supplies. This averted a potential further spike in inflation.

Zambia

El Nino

Inflation

Interest Rates

Economy

Drought

Consumer Prices

Food Inflation

Kwacha