Consumer price index for the month of October in Africa’s copper hotspot Zambia, is forecast to ebb higher in Thursday 31 October announcement. The Central Statistics Office (CSO) is expected to announce the monthly annual inflation number tomorrow.
Given the rising energy inflationary pressures fueled by a fuel price hike effected in September adding to autopsy effects of extended load management, inflation is projected to print between 11% and 11.5% compared to last months levels of 10.5%. Currency depreciation effects are also a key driver of the expected print as a weak currency weighs import inflation. The Kwacha has come under pressure from increased dollar demand to fund the petroleum energy and agriculture sectors in addition to central bank purchases as the key off-taker of foreign exchange as it aims to shore up reserves to improve import cover.
Prices in the month of October have been on the rise with cement in parts of Lusaka priced at K85 per 50 kilogram bag from K65 initially. Among other key commodities, maize meal prices remain fairly elevated as drought effects manifest.
Risks to inflation remains high as the markets expect a 75% tariff hike currently being reviewed by the energy regulation board to fund importation of 300MW of power from South Africa’s Eskom. Citizens will bear the brunt of this hike. Should this actualize the central bank will have to managed currency pressure as Zambia expends $21million monthly to fund the power purchase in question. Medium term inflation outlook ranges between 12.5%-15% should these risks materialize.
The Kwacha Arbitrageur