Lagged Kwacha rout effects accelerate yearend inflation to 11.7%

November currency ‘bear’ effects were priced into the December headline inflation accelerating it to 11.7%, 90bps wider from previous month. The latest numbers were provided by Zambia Statistics Agency (ZSA) in Lusaka the capital and do reveal a rising consumer price index as the copper producer grapples with drought autopsy effects of extended load management and rising food prices in a volatile currency environment.

Energy deficit still wide. Power bottleneck currently stands at 871MW having narrowed from 890MW in October after MCL is now firing 135MW into the grid. A scanty rainfall pattern thus far has raised worries about another drought as most farmers that have planted are nervous about a weak harvest if the rains do not increase.

Manufacturing still bears the brunt of load shedding. Zambia’s manufacturing firms have continued to bear the brunt of rolling black outs which has elevated their operational cost environment fueled by higher diesel usage forcing selling prices higher. This adds a layer of pressure from drought effects which manifest in high maize meal prices.

Elevated inflation for 2 years. The Bank of Zambia projected earlier in the year that inflation would be high for 8 quarters (2 years) as rising risks to growth actualize. Zambia’s CPI has been in breach of the 8% upper bound of the BOZ 6-8% target range for over 7 months.

The Kwacha Arbitrageur