(Bloomberg) -- Zambian inflation slowed to a two-and-a-half year-low in April, easing pressure on the central bank’s monetary policy committee to raise interest rates when it meets next month.
Consumer prices rose 11.5% from a year earlier, compared with 13.1% in March, interim Statistician-General Mulenga Musepa told reporters Wednesday in Lusaka, the capital. Food-price growth slowed to 14.1% in April, compared with 15.3% in the previous month, and non-food inflation decelerated to 8.2% from 10.3%. Prices climbed 0.7% in the month.
The slowdown for a ninth consecutive month supports the central bank’s view that inflation, which has breached the top of its 6% to 8% target band since May 2019, is trending downward. That may give the MPC room to keep the key interest rate unchanged on May 17 to assist the economy’s fragile recovery. Zambia’s Purchasing Managers’ Index declined to 49.6 in March, compared with 50.3 a month prior, with a level below 50 signaling a contraction.
The deceleration also gives the MPC time to assess the impact a stronger currency will have in offsetting upward price pressures caused by supply shocks from the war in Ukraine, the removal of fuel subsidies and Indonesia’s ban on cooking oil exports.
Zambia imports everything from fuel to food, so currency volatility has a major bearing on price growth.
The kwacha has appreciated 6% against the dollar this month, making it the best performing currency on the continent. The gain has been partly driven by China committing to join a creditors’ committee to restructure about $17.3 billion of Zambia’s external debt, after it became the first African nation to default in the pandemic era.
Reworking the debt is key to the southern African nation getting $1.4 billion bailout from the International Monetary Fund, which would also unlock further concessional financing.
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