Zambian Inflation Hits 32-Month High as Food Prices Soar
Zambia’s annual inflation rate rose to a 32-month high in August as an El Niño-induced drought continued to wreak havoc on food prices.
Consumer prices increased 15.5%, compared with 15.4% in July, Statistician-General Goodson Sinyenga told reporters in Kabwe, about 142 kilometers north of the capital Lusaka, on Thursday. Prices rose 0.9% in the month from 1% in July.
The extreme drought has constrained the economy, withered crops, curtailed hydropower-generation and led to a surge in costly imports that have weakened the kwacha. Prices of food, which make up more than half of the inflation basket, rose to 17.6% from 17.4% last month and non-food price growth slowed to 12.5% compared with 12.6% in July.
The dry spell has complicated efforts by the central bank to return inflation to its 6% to 8% target band by next year and meant that it’s had to keep its key interest rate higher for longer.
The bank this month held the rate at a seven-year high of 13.5% after six straight hikes of a combined 450 basis points. It’s also aiming to conclude consultations over plans to curb the use of foreign currency in domestic transactions to bolster the kwacha.
A request by state-power utility Zesco Ltd. to increase electricity tariffs by as much as 156% to cover the cost of emergency supplies could have further fanned inflation but was rejected by the energy regulator last week.
