Zambia’s Inflation Nears Two-Year High on Currency Tumble

Taonga Mitimingi
·1 min read

(Bloomberg) -- Zambian inflation accelerated at the fastest pace in almost two years in October as the kwacha continues to tumble, bringing pressure to bear on the central bank to raise interest rates next month.

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Consumer prices rose 12.6% from the prior year, compared with 12% in September, Statistician-General Mulenga Musepa told reporters in Lusaka, the capital, on Thursday. That was the highest rate since March 2022. Monthly inflation stood at 0.8%.

The main contributors to the quickening were surging transport and food prices, stoked by a sharp depreciation of the kwacha against the dollar.

The Oct. 14 announcement of a memorandum of understanding with official creditors to restructure Zambia’s $6.3 billion of debt, along with a deal in principle with bondholders to rework its eurobonds has done little to stabilize the currency. That’s even as the deals will pave the way for the disbursement of another portion of a $1.3 billion loan from the International Monetary Fund.

The currency of Africa’s second-biggest copper producer hit a fresh 27-month low to trade at 21.8375 per dollar by 10:28 a.m. in Lusaka. The kwacha has been hit by dollar shortages caused by slumping mining output and lower metal prices as fuel import costs rise.

Food inflation quickened to 13.6% in October from 13.4% last month. Non-food price growth leapt to 11.3% from 10.1% in September.

The Bank of Zambia’s monetary policy committee’s next rate decision will be on Nov. 22. It’s increased rates by a combined 100 basis points at its three meetings this year, taking borrowing costs to 10%.

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