Zambia's annual inflation rate surged to its highest level in nearly three years in October, primarily driven by the severe drought that has devastated the nation.

This drought, considered the worst on record, has resulted in persistently high prices for essential commodities such as meat, corn, and cereals.

According to acting Statistician-General Sheila Mudenda, consumer prices increased by 15.7% compared to the same month last year, a slight uptick from 15.6% in September. This marks the highest inflation rate observed since December 2021.

The International Monetary Fund (IMF) predicts that inflation will continue to rise, influenced by the depreciation of the Zambian Kwacha, which has weakened by nearly 4% against the US Dollar this year, Bloomberg reports

This depreciation has led to increased costs for food and electricity imports, further contributing to rising prices across the board.

In addition, earlier this year, Zambia experienced a drought exacerbated by El Niño, which severely impacted agricultural production and reduced the capacity for hydropower generation—Zambia’s primary source of electricity. As a result, households and businesses are now receiving a maximum of just three hours of electricity per day.

The drought's impact was significant enough for the IMF to revise its growth forecasts for Zambia in 2024, lowering the projection from 2.3% to 1.2%. This would mark the slowest economic growth in 25 years, excluding the contraction experienced in 2020 during the peak of the pandemic.

Despite the rising inflation, it is unlikely that the central bank will opt to increase interest rates at the upcoming meeting on 13th November as a means to bolster the economy. The bank has previously indicated that the inflationary pressures are primarily supply-driven. 

Meanwhile, non-food inflation, which serves as an indicator of underlying price pressures, eased slightly to an annual rate of 12.2%, down from 12.4% in the previous month.

In contrast, food price inflation accelerated to 18.2% in October, up from 17.9% in September, highlighting the ongoing challenges facing the Zambian economy.