Economic body insists on sustained vigilance amid persistent economic risks facing Zambia

The Economic Association of Zambia (EAZ) has underscored the importance of maintaining vigilance in the light of persistent downside risks and inflationary pressures facing the country.

In a statement issued on Friday, EAZ president, Oswald Mungule, highlighted several ongoing challenges, including external supply chain disruptions driven by geopolitical tensions and climate-induced shocks, as well as global economic uncertainty stemming from divergent interest rate paths in advanced economies.

Additionally, he cited exchange rate volatility linked to Zambia’s external debt obligations and limited foreign exchange reserves as critical risks to watch.

“These risks could undermine the projected path of disinflation, particularly through imported inflation and rising input costs.

“The depreciation of the Kwacha in recent quarters remains a significant driver of inflation in tradable goods, and as such, continued management of the exchange rate is essential for preserving the effectiveness of monetary policy,” Mungule stated.

He also expressed EAZ’s support for the Bank of Zambia’s cautious monetary stance, emphasizing the need for proactive risk assessments, particularly in relation to external balances, capital flows, and terms of trade developments.

Acknowledged the Central Bank’s assessment of recent improvements in Zambia’s macroeconomic environment, he cited a deceleration in headline inflation, moderation in food prices, a decline in non-food inflation components, and improved inflation expectations.

Key contributing factors include an anticipated bumper maize harvest of 3.6 million metric tonnes and a drop in international crude oil prices, both of which are expected to ease food and fuel costs, he noted.

“These positive developments collectively support the current monetary policy stance and signal improving macroeconomic fundamentals,” Mungule said.

“In particular, the expected rise in agricultural output is likely to reduce food inflation—a major component of Zambia’s Consumer Price Index (CPI)—while lower fuel prices should help ease production and transportation costs, thereby softening cost-push inflationary pressures,” he added.

Looking ahead, Mungule reaffirmed EAZ’s optimism that inflation could return to the Central Bank’s medium-term target range of 6 to 8 percent by 2027, as projected.

He further called for the continued monitoring of domestic supply conditions and global commodity price movements to guide timely and effective policy responses.

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