Zambia Inflation Accelerates as Underlying Price Pressures Build

Zambian inflation accelerated to a two-month high in February as non-food price growth quickened, suggesting that underlying price pressures are mounting.

(Bloomberg) — Zambian inflation accelerated to a two-month high in February as non-food price growth quickened, suggesting that underlying price pressures are mounting.

Zambia’s annual inflation rate rose to 9.6%, up from 9.4% in January, driven by rising fuel and charcoal prices and a weaker currency, Statistician-General Mulenga Musepa told reporters Thursday in Lusaka, the capital.

A quarter point rate hike last week and an increase in commercial lenders’ reserve ratios to 11.5% from 9% from Feb. 13 has done little to halt a slide in the kwacha, which has declined 1.7% since the implementation, fanning price pressures and led the Bank of Zambia’s monetary policy committee to alter its inflation forecasts.

The MPC expects inflation to quicken this year to average 11.1%, ending a deceleration trend toward its 6% to 8% target since mid-2021 and only return within range by the first quarter of 2024.

The kwacha’s slump has been hit by a rally in the dollar that’s been driven by expectations of higher-for-longer interest rates in the US, as well as stalled talks to rework $12.8 billion of Africa’s first pandemic-era sovereign defaulter’s external loans. The southern African nation imports everything from fuel to food products, so sustained currency weakness has a major impact on prices, and unless the kwacha recovers, the MPC may be persuaded to raise rates again in May.

US officials hope to resolve the delays in the debt talks in Bangalore, India, this week at a meeting of finance ministers and central bank governors from the Group of 20 rich countries.

Food inflation was the same as last month at 11.6% and non-food price growth quickened to 6.9% from 6.4% in January. Prices rose 1.9% in the month.

Plans to raise electricity tariffs by 37% and a possible reduction in corn output because of adverse weather conditions and infestations of fall armyworms may also fuel inflation.

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