Zambia’s inflation rate holds steady, helped by kwacha strength

Zambia’s annual inflation rate held steady, remaining near the floor of the central bank’s 6% to 8% target range as a rally in the kwacha contained import costs.

Consumer prices rose 6.5% in July from a year ago, an unchanged pace from the previous month, Statistician-General Sheila Mudenda told reporters in Lusaka, the capital, on Thursday. Prices rose 0.2% in the month.

The kwacha has appreciated almost 18% against the dollar this year, buoyed by soaring copper prices and steps to increase its use, making it one of the world’s best-performing currencies among those tracked by Bloomberg.

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Inflation was also muted by the southern African nation’s decision this month to extend a moratorium on fuel taxes until Sept. 30, as a re-escalation in the US-Iran conflict stokes energy and fertiliser prices.

The kwacha’s rally and the steadiness of inflation may give President Hakainde Hichilema a boost before elections on August 13, when he’ll seek a second term. Voters are likely to judge the government’s economic performance through the currency, or its ability to achieve exchange-rate stability, said David Cowan, chief Africa economist at Citigroup.

Annual food inflation cooled to 6.4% in July from 6.7% a month earlier, and non-food price growth rose to 6.7% from 6%.

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