Inflation Rise Continues, Reaches 16.6%

The annual inflation rate continued to rise in May and stands at 16.6%, well above the Bank of Zambia (BoZ) target of between 6% and 8%. This marks the highest rate of inflation in almost four years and is the 14th consecutive month it has risen. The month-on-month rate represented a rise of 1.6%.

Zambia previously recorded an annual inflation rate increase of 15.7% in April; up from 14% in March this year. 

During May food inflation increased from 17% to 17.5%. Non-food inflation increased from 14.2% to 15.5% over the same period. 

BoZ has previously stated that inflation rates are expected to remain high for the early part of its two-year forecast period, preventing it from cutting interest rates which could help cushion the economy against the impact of the Covid-19 pandemic.

However, earlier this month BoZ cut its interest rate from 11.5% to 9.25%. It is the first cut in more than two years and the biggest cut since 2012. 

The central bank projects that the economy will contract by 2.6% this year. The IMF has projected a 3.5% contraction, citing power shortages as a significant problem in addition to the current coronavirus pandemic.

According to government, Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19.