Zambia Economic Outlook
Available data suggests that the economy gathered some steam at the outset of the year. The private-sector PMI rebounded in January–February from Q4’s slump. That said, it fell into contractionary terrain in March, weighed on by a weaker kwanza and February’s interest rate hike. Momentum seemingly remained subdued in April, as the PMI continued to point to weaker business activity, while inflation climbed back into double-digit territory after 11 months, likely denting private spending. Going forward, May’s rate hike is set to hamper the economy further. In other news, in late April, the country submitted a debt restructuring proposal to official creditors; reaching an agreement is crucial for the disbursement of USD 188 million of IMF funding. Talks are ongoing, and the IMF expects that a deal will be reached soon.
Inflation increased to 10.2% in April from March’s 9.9%, moving further away from the Central Bank’s 6.0–8.0% target range. The acceleration was driven by a broad-based uptick in price pressures. The Bank sees inflation remaining above target during this year and the next. Accordingly, on 15–16 May, it raised the key policy rate to 9.50% from 9.25%.