EAZ Eyes 7.5% Inflation by Q1



Projection follows sustained slowdown in non-food price growth

By Francis Maingaila ♥️ 

Lusaka, Zambia24 —  (1-12-2025) -- The Economics Association of Zambia (EAZ) says inflation is on track to fall to 7.5% by the first quarter of 2026, with President Osward Mungule attributing the improved outlook to the latest drop in annual inflation and strengthening macroeconomic conditions.

Mungule said the most important development driving the improved forecast is the November inflation decline from 11.9% to 10.9%, led mainly by lower non-food prices such as fuel, airfares and vehicles. He said the slowdown signals firm progress toward the Bank of Zambia’s 6–8% target band.

He said EAZ’s 2026 projection is supported by current disinflation patterns, though it remains slightly more favourable than estimates by other institutions. 

According to Mungule, inflation is expected to continue easing in the first half of 2026.

Mungule said the latest price developments have tightened real monetary conditions despite the policy rate cut to 14.25%, noting that reduced inflation has lifted the real policy rate and supported disinflation momentum.

He said households are benefiting from lower non-food inflation—now around 6.6%—as transport and fuel pressures ease, offering some recovery in purchasing power.

Mungule noted that the Kwacha’s appreciation to ZMW 22–23 per USD in recent months has helped stabilise import prices, further aiding the disinflation process.

He said the inflation decline is also lowering government borrowing costs, an improvement reinforced by Zambia’s Fitch Ratings upgrade to B- (Stable). He described the rating action as a major confidence boost following progress in external debt restructuring.

Mungule said the upgrade is expected to ease the cost of capital, improve investor confidence and support exchange-rate stability, all of which contribute to Zambia’s improving inflation and growth outlook.

He added that EAZ maintains a positive growth projection of 6.7% for 2025, driven by mining, manufacturing, tourism and agriculture.

However, Mungule cautioned that Zambia must maintain fiscal discipline and policy consistency ahead of the 2026 election period to preserve the gains made.

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