August inflation at 20-month high.
• BOZ target band is 6-8%
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.