Zambia’s year-on-year inflation continued to ease in January, falling below 10% for the first time in almost three years and bolstering expectations of additional reductions in interest rates.
Consumer prices in the copper-producing southern African country increased by 9.4%, down from 11.2% in the previous month, acting Statistician-General Sheila Mudenda said at a briefing in Lusaka on Wednesday.
The Kwacha has strengthened 16% against the US Dollar since December, supported by central bank limits on domestic foreign-currency transactions and rising copper prices, helping to curb inflationary pressures.
Copper, which generates over 70% of Zambia’s export earnings and up to a quarter of state revenue, has surged to record levels amid supply disruptions at major mines and a shortage of ore.
The Kwacha could strengthen further once negotiations for a new International Monetary Fund program are finalised, Bloomberg reports.
The lender’s executive board authorised a payout of roughly $190 million to Zambia on Tuesday, bringing its current financing program to a close and opening the door to discussions on new assistance.
The slowdown in inflation could encourage the Bank of Zambia to continue lowering rates at its 11th February meeting, after it reduced the benchmark rate by 25 basis points to 14.25% in November, the first cut since August 2020.
Inflation has still remained above the central bank’s target ceiling of 6%-8% since May 2019.
Yearly food inflation slowed to 10.9% in January from 12.9% the previous month, while non-food inflation eased to 7.3% from 8.7% in December. Overall consumer prices increased by 0.5% during the month.