Zambian Inflation Nears Two-Year High as Kwacha Slump Persists

Taonga Mitimingi
·2 min read

(Bloomberg) -- Zambia’s inflation rate leapt to its highest level in almost two years in December as the currency’s worst depreciation since the country became Africa’s first pandemic-era sovereign defaulter in 2020 raised the cost of imported goods like cereals and meat.

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Consumer prices climbed 13.1% from a year earlier, compared with 12.9% in November, Statistician-General Mulenga Musepa told reporters in Lusaka, the capital, on Thursday. That brings the average for the year to 10.9%, in line with the central bank’s forecast. Costs rose 1% in the month.

The kwacha has weakened 29% against the dollar this year as lower copper production, the southern African nation’s main foreign-exchange earner and weaker metal prices led to shortages of the greenback and issues with debt talks soured sentiment.

China last month rejected a proposed deal between Zambia and bondholders partly because of a misunderstanding about the scale of losses private lenders would take, dampening the African nation’s efforts to come out of default.

Read More: China Snarls Zambia Debt Deal Over Size of Bondholder Losses

High inflation and relentless currency weakness may persuade the central bank’s rate-setting panel to increase borrowing costs for a fifth consecutive meeting when it meets in February. It has increased borrowing costs by 200 basis points this year to 11% and the reserve-ratio requirements for lenders by four times that amount to 17% to contain price pressures and halt the slide in the kwacha.

Food inflation was the main contributor to the higher overall number. It stood at 14.2% in December from 13.7% last month. Non-food price growth eased to 11.6%, compared with 11.8% in November, after fuel prices were kept unchanged for a second straight month in December.

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