Inflation Slows For Ninth Consecutive Month, Easing Rates Pressure

Inflation in Zambia slowed to a two-and-a-half year low in April, easing pressure on the central bank to raise interest rates. The figures marks the ninth consecutive fall in inflation rates, benefitting families faced with otherwise high prices for food and other essentials. 

Consumer prices this month rose by 11.5% compared to the previous year, down from 13.1% in March and 24.4% when the New Dawn government was elected in August 2021. Food price growth also slowed to 14.1% in April, compared with 15.3% the previous month.

This is despite a rise in global prices for various commodities, including oil and natural gas, which is tied to the war between Russia and Ukraine and the lingering effects of the Covid-19 pandemic.

The slowdown supports the view of the Bank of Zambia that inflation is trending downwards and may allow the bank to leave interest rates unchanged in order to assist the economy’s recovery. The figures also give the BoZ’s monetary policy committee time to assess the impact a stronger Kwacha will have in offsetting price pressures caused by the war in Ukraine and Indonesia’s ban on cooking oil exports.  

The Kwacha appreciated 6% against the dollar this month, making it the strongest performing currency in Africa. The gain has been partly driven by China committing to join Zambia’s creditors committee to restructure the country’s $17.3 billion external debts. 

Restructuring the debt is key to Zambia receiving its $1.4 billion bailout from the IMF and unlocking further concessional financing.  

Since the United Party for National Development (UPND) took office, inflation has more than halved, alleviating some of the pressure on families brought on by rising prices. The strengthening Kwacha also gives businesses more purchasing power on international markets in order to import products such as food and fuel.