Zambian inflation edges up as drought and weak Kwacha bite
Zambia’s annual inflation rate accelerated further in May, fanned by currency weakness and the effects of an El Niño-induced drought, the worst in at least four decades.
Consumer prices rose 14.7% this month, compared with 13.8% in April, Statistician General Goodson Sinyenga told reporters in Lusaka, the capital, on Thursday. Prices rose 1.4% in the month from 1% in April.
The kwacha has continued to weaken against the dollar, with demand for the greenback buoyed in part because the drought slashed crop production and hyrdo-power production, forcing Zambia to import food and electricity. The kwacha is the eighth-worst performing currency in the world among those that Bloomberg tracks.
The southern African nation has received commitments totaling about $500 million from its partners to deal with the effects of the drought, said Secretary to the Treasury Felix Nkulukusa. It needs about $900 million this year, according to a formal appeal for emergency aid made by President Hakainde Hichilema last month.
Annual food inflation accelerated to 16.2% from 15.7% last month and non-food price growth advanced to 12.7% versus 11.2% in April.
The economy is expected to grow 2.3% this year. It is projected to recover from the drought and accelerate to 6% growth in 2025.
The central bank, which raised its key interest rate by 100 basis points to 13.5% earlier this month, sees inflation averaging 9.8% next year. “The bank stands ready to take appropriate action should inflation persist above the 6% to 8% target band,” Governor Denny Kalyalya said on May 15.
