For the first time in six years, Zambia’s inflation rate is on the verge to fall within the central bank’s target range. This is a major turning point for the southern African country’s economy. Zambia’s secretary to the treasury, Felix Nkulukusa, said Thursday that annual consumer price inflation is expected to fall below 8% by the end of 2025, reaching the Bank of Zambia’s target range of 6 to 8%. If this target is met, the country would meet its inflation target for the first time since 2019.
“We expect inflation to continue to decline,” Nkulukusa said during a speech in Lusaka. “We are confident that we can probably reach the 6-8% mark by the end of the year.”
From Pandemic Crisis to Stabilization
Zambia has faced significant inflationary pressure in recent years. In 2021, inflation reached nearly 25% after the country experienced a historic debt default during the COVID-19 pandemic, becoming the first African country to experience such a default.
Despite the improving situation, Zambia suffered further setbacks in 2024 when a devastating drought caused inflation to spike to 16.8%. The drought, considered the worst in over a century led to widespread power shortages and rising food and energy prices due to drastic maize harvests and a sharp decline in hydropower production. The weak currency further exacerbated the situation by driving up import costs, further increasing pressure on already economically struggling households and businesses.
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Nkulukusa’s inflation forecast is significantly more optimistic than the central bank’s February projections, which predicted double-digit inflation next year. If confirmed, it would provide much-needed relief to Zambians after years of rising living costs. According to Bloomberg, a faster-than-expected decline in inflation would also boost the country’s economic momentum. Moody’s Investors Service raised its outlook for Zambia’s external debt, suggesting a possible upgrade of its credit rating to Caa2.
Zambia’s Inflation Forecast Improves for 2025
While this year’s rains have raised hopes for a better harvest, challenges remain. The power grid (Zambia’s main source of electricity) is reportedly still operating at reduced capacity. This has led to power outages, and experts have indicated that recovery depends as much on the success of agriculture as on the rehabilitation of the electrical infrastructure. Nevertheless, the government’s confidence in the recovery reflects widespread optimism that Zambia is turning a corner after years of economic instability.
