Policy centre urges targeted interventions to bolster monetary policy in tackling Zambia’s inflation surge

The Centre for Trade Policy and Development (CTPD) has called for a comprehensive strategy to address rising inflation amidst slowing economic growth, as the Bank of Zambia (BoZ) prepares to announce its monetary policy rate.

CTPD, through its Public Finance Researcher, Elijah Mumba, acknowledged the importance of the monetary policy rate as a tool for managing inflation.

However, Mumba said that targeted interventions were crucial to complement monetary measures in addressing the underlying causes of inflation.

“In this regard, measures that target reducing the exchange rate will be critical. Additionally, to curb food inflation, the government must continue to support agricultural efforts, including the provision of small loans to farmers and creating a conducive environment for commercial farming to ensure early production of maize and other crops,” Mumba stated in a statement issued on Wednesday.

Zambia’s inflation had been on an upward trajectory for the past 19 months, reaching 15.4 percent in July 2024.

This surge was primarily driven by food inflation, which accelerated from 16.8 percent in June 2024 to 17.4 percent in July 2024—the highest rate in the past 12 months.

CTPD anticipated that inflation would likely remain elevated in the second half of the year, driven by the Kwacha’s weak performance against major currencies and the adverse impact of drought on food prices.

Concurrently, the economic growth forecast for 2024 had been revised downward to 2.3 percent from an earlier estimate of 4.4 percent.

“Given that the inflation drivers are largely supply-side, particularly food-related, adjustments to the Monetary Policy Rate alone will not be adequate to curb the rising inflation.

“Additionally, the slowed economic growth highlights the need to expand economic activity. The country has suffered reduced productivity due to low electricity supply caused by drought and inadequate investments in the mining sector have also affected the growth rate,” Mumba added.

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