Zambia inflation hits 20-month high as currency woes persist
Zambian inflation reached its highest point in 20 months in November due to a decline in the kwacha's value, causing an increase in the prices of imported goods such as cereals, vehicles, and spare parts. Consumer prices saw a 12.9% year-on-year rise, up from October's 12.6%, marking the highest inflation rate since March 2022, with costs rising by 0.9% within the month.
To combat inflation, which has surpassed its 6%-8% target range, Zambia's central bank raised its benchmark lending rate from 10% to 11% last week. This move represents the fourth increase in the key rate this year by the Bank of Zambia, aiming to control inflation, which climbed from 12.0% in September to 12.6% year-on-year in October.
Following the policy decision, central bank Governor Denny Kalyalya, in a press conference, noted that inflationary pressures were expected to intensify from the fourth quarter of 2023 to the third quarter of 2025. Kalyalya also addressed the challenges faced by the Zambian kwacha, citing delays in restructuring the country's debt, which is affecting the foreign currency flows anticipated by the bank.
Points clés à retenir
The devaluation of the kwacha has considerable repercussions on prices, given Zambia's heavy dependence on imports, especially for essentials like fuel and fertilizer, rendering it vulnerable to fluctuations in exchange rates. Earlier this week, Zambia faced a setback in its attempts to restructure its debt, as the government declared that a revised agreement to overhaul $3 billion of Eurobonds couldn't proceed due to objections from official creditors, including China. The International Monetary Fund (IMF) has proposed the potential need for additional policy tightening while concurrently announcing a staff-level agreement to disburse $184 million for Zambia under its support program.