Zambian inflation quickened to a three-month high in March as a slide in the currency, largely driven by the country’s stalled debt restructuring talks, pushed up the price of imports such as gasoline and cereals.
(Bloomberg) — Zambian inflation quickened to a three-month high in March as a slide in the currency, largely driven by the country’s stalled debt restructuring talks, pushed up the price of imports such as gasoline and cereals.
Annual consumer-price growth accelerated to 9.9%, from 9.6% in February, Statistician-General Mulenga Musepa told reporters Thursday in Lusaka, the capital. It’s now exceeded the ceiling of the central bank’s 6% to 8% target range since April 2019.
The currency is on course for its biggest quarterly decline since the first three months of 2020 when investors sold off the kwacha over fears of Zambia becoming Africa’s first pandemic-era sovereign defaulter. The country defaulted in November that year.
Delays in talks to rework $12.8 billion of its external loans are putting pressure on the kwacha. “Prices are once again creeping up, and much-needed international investment is blocked,” Zambia’s President Hakainde Hichilema said in an opinion piece on March 28.
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Finance Minister Situmbeko Musokotwane earlier this month said he hopes that the debt restructuring process will be concluded by the end of this quarter or shortly thereafter.
A quarter-point interest rate hike and an increase in commercial lenders’ reserve ratios to 11.5% from 9% last month have done little to steady the kwacha. Currency weakness and quickening inflation are likely to persuade the central bank’s monetary policy committee to increase interest rates for a second time this year in May.
Plans to raise electricity tariffs by 37% and a possible drop in corn output because of adverse weather conditions and fall armyworms infestations are further upside risks to inflation.
Food inflation accelerated to 11.8% from 11.6% last month and non-food inflation quickened to 7.3% from 6.9% in February. Prices rose 1% in the month from 1.9% in February.
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