Zambian Inflation Rate Falls to 14-Month Low on Food Costs
Zambia’s inflation rate fell to a 14-month low in December tempered by food-price growth.
Consumer prices rose 16.4% from a year earlier, compared with 19.3% in November, Zambia’s interim statistician-general, Mulenga Musepa, told reporters Thursday in Lusaka, the capital. That’s the lowest level since October 2020.
The drop in the rate was driven by food-price growth that slowed to a 13-month low of 19.9% in December, compared with 25.4% in the prior month, and non-food inflation decelerating to 12.1% from 12.2% in November. Costs rose 0.6% in the month.
The sustained slowdown in inflation will likely see the central bank, which targets price growth within a range of 6% to 8%, keep the benchmark interest rate unchanged when its monetary policy committee meets in February. That’s to allow the MPC time to assess the impact a 50-basis point hike in November and a stronger currency will have in curbing inflation and offsetting rising fuel costs.
The kwacha, the second-best performing currency globally this year of those tracked by Bloomberg, has gained almost 7% against the dollar since Dec. 3 when the southern African nation reached a long sought-after staff level agreement with the International Monetary Fund. The deal for about $1.4 billion in funding must still be approved by the Washington-based lender’s executive board and is needed to pave the way for negotiations with creditors to restructure about $16 billion in external debt. The former government of then-President Edgar Lungu stopped servicing almost all dollar debt in October 2020.
To help secure funding from the IMF, the energy regulator on Dec. 17 increased pump prices by a fifth after scrapping fuel subsidies that had kept costs artificially stable for two years. It also said gasoline and diesel prices would be reviewed every 30 days instead of bimonthly.
The increase in fuel costs followed by a hike in transport fares of 18% to 34% were not reflected in the latest inflation reading as they happened after price data was collected by the statistics agency. That and a 13% increase in electricity prices expected in March could boost inflation.
The central bank last month said it projects inflation to average 15% next year and 9.3% in the first three quarters of 2023.
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