The annual inflation rate in Zambia reached a 29-month high in June, and the economy grew at the slowest pace in two years as the nation continues to deal with the impact of an El Niño-induced drought, the worst in almost 60 years.

Consumer prices increased 15.2% compared to 14.7% in May, fuelled by elevated costs of corn meal, cereals and spirits, according to Statistician General Goodson Sinyenga in Ndol, north of Lusaka on Thursday. 

Zambia’s economy grew 2.2% in Q1 compared to 8.5% growth during the previous three months, Bloomberg reports.

The dry spell has damaged crops, driving up food prices and leading the country to increase expensive imports. Annual food inflation rose to 16.8% from 16.2% last month, while non-food price growth increased to 13% from 12.7% in May.

In addition, the effects of the extreme weather have hampered efforts by the central bank to return inflation back to the target of between 6% and 8%. 

Policymakers have increased interest rates by 450 basis points since February last year to 13.5%.

Earlier this week, a statement by the International Monetary Fund urged policymakers to maintain “a tight monetary stance until inflation declines toward the Bank of Zambia’s target range” to help manage inflation expectations

Furthermore, the drought has severely impacted hydro-power generation, causing rolling blackouts that last more than half a day. To address the shortfall, the country is importing 188 megawatts from neighbouring Mozambique and has reduced electricity exports by nearly half to 281 megawatts, according to the state-owned power utility Zesco Ltd. on Monday.

Additionally, last week, Zambia’s Finance Minister, Situmbeko Musokotwane, announced a supplementary budget of 41.9 billion Kwacha ($1.6 billion), part of which will be allocated to addressing the aftermath of the drought.