Inflation To Remain High, Kwacha Falls Further

According to the Bank of Zambia (BoZ) the rate of inflation is expected to remain above its target during the first half of 2020.

Zambia recorded an annual inflation rate of 13.9% in February 2020. The rate is double the Bank of Zambia’s target of between 6 and 8%.

This figure is a further increase on the rate of 12.5% in January 2020, and 11.7% in December. It is the highest rate in almost three years. In 2019 inflation started at 7.9% but rose following increased food prices as a result of drought and a poor maize harvest.

BoZ attributes the trend to continued problems with electricity supply and the increase in external debt servicing. However, it expects inflation to reduce in the second half of the year based on expected improvements in agricultural output as a result of favourable rainfall patterns. It is not yet clear what impact the advent of coronavirus in Zambia may have on these projections.

Meanwhile, the Kwacha has lost further ground on the foreign exchange market, breaching K17 to the dollar.

The fall has been blamed on the coronavirus outbreak, according to Vice President Inonge Wina. However, UPND leader Hakainde Hichilema is among those to have challenged government on the claim, telling them to stop playing the blame game and recognise that it has failed to manage the country’s economy.

According to media outlet News Diggers Hichilema previously stated the:

“Madam Inonge Wina is not being truthful in her responses, she knows that the depreciation of the kwacha is due to PF’s poor economic management and shortage of leadership overall. The Kwacha is not depreciating because of coronavirus. When did this coronavirus come anyway? The disease only broke out a few weeks ago, so what has it got to do with all the challenges that this country has been going through, the depreciation of the Kwacha inclusive? Evidence is clearly in abundance that PF has failed! The Kwacha had already depreciated to K14 to US$1 long before the advent of the virus.”

Former commerce minister Robert Sichinga has also questioned government’s reasoning.

“They are offering excuses as though it is someone else’s responsibility to ensure that Zambia’s copper price remains the same. How about before coronavirus, was the exchange rate no dropping? How does she explain that one? How does the Vice President explain the fact that the falling of the Kwacha value did not just start when coronavirus came on the scene?” Sichinga is quoted as stating.