Au­gust in­fla­tion at 20-month high.

• BOZ target band is 6-8%

Zambian Business Times - - FRONT PAGE -

ZAM­BIA’s Au­gust in­fla­tion rose 0.3 points to a 20 month high of 7.8%. This was es­tab­lished in an an­nounce­ment made by the Zam­stats Di­rec­tor Good­son Sinyenga in the cap­i­tal Lusaka.

ZAM­BIA’s Au­gust in­fla­tion rose 0.3 points to a 20 month high of 7.8%. This was es­tab­lished in an an­nounce­ment made by the Zam­stats Di­rec­tor Good­son Sinyenga in the cap­i­tal Lusaka.

This ex­ceeds the cen­tral bank (BOZ) pre­scribed thresh­old range of 6-8%. Zam­bia suc­cess­fully reigned in hy­per­in­fla­tion pre­cip­i­tated by an au­topsy of spec­u­la­tive driven cur­rency volatil­ity, that pushed the kwacha to K14.2/USD.

In­fla­tion highs of 22.9% were recorded that trig­gered govern­ment debt curve align­ment higher, pay­ing yields of over 20% on trea­sury bills and bonds. This was in a quest to make real yields pos­i­tive.

Driv­ers of the uptick in the con­sumer price in­dex (CPI) was rise in maize meal prices and mo­tor ve­hi­cle im­por­ta­tion costs. Maize meal prices rose as a con­se­quence of grain prices while mo­tor ve­hi­cle im­ports were im­pacted by volatil­ity in the ex­change rate in the month.

Up­side risks to in­fla­tion high

Risks to in­fla­tion re­main fairly high from a volatile South Africa rand against the dol­lar which will highly likely im­pact the 33% SA goods Zam­bian im­port bas­ket. Africa’s most in­dus­tri­al­ized SA is ex­pe­ri­enc­ing higher cur­rency volatil­ity than in Ja­cob Zuma’s reign. Po­lit­i­cal risk around land ap­pro­pri­a­tion and nu­clear deal de­ci­sions, has con­tin­ued to price into the cur­rency mar­ket caus­ing a ferocious rout.

This cou­pled with a strong dol­lar fu­elled by trade wars be­tween the US and China has waned emerg­ing mar­ket (EM) cur­ren­cies caus­ing in­fla­tion­ary spi­rals across. Due to the lag­ging ef­fects, it is fore­cast that this will be taken into ac­count in the Septem­ber num­ber.

Zam­bia is also ex­posed to in­ter­na­tional crude prices that have since been on the rise with Brent at USD77.75bbl. This rep­re­sents 23% higher prices than the last val­u­a­tion when the South­ern African na­tion ef­fected price hikes. Zam­bia’s peers have ad­justed pump prices to re­flect the mar­ket.

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