During the Q1 media briefing for 2026 […]

During the Q1 media briefing for 2026 the Bank of Zambia governor Dr. Denny Kalyalya disclosed that inflation is projected to remain within the (6-8) target band, for the next 8 quarters owing to the expected favourable maize harvest in the current crop marketing season and the observed stability in the Kwacha per US dollar exchange rate which are strongly supportive of a lower inflation path.

However, some experts have regarded the bank’s projection to be over ambitious considering that the country doesn’t have control of the USA- IRAN conflict which is currently taking stance and has affected both international and local fuel prices. But in the presentation the central bank mentioned that the middle east conflict which has already resulted in higher global crude oil prices and in turn, a rise in domestic fuel pump prices, were taken into consideration in making the projection.

With the Bank anticipating a good harvest, stable exchange rate, will these economic variables remain within a favourable stance for the next 8 quarters to support inflation in remaining within the target band?

Economic Expert Notulu has noted that the Bank’s inflation projection to remain within (6-8) target band as an over ambitious target noting that one of the major challenges the country has in terms of depleting the reserves and pushing cost inflation is as a result of changes in fuel prices.

Speaking in an interview with Zambian Business Times- ZBT Notulu noted that the increase in crude oil prices affected the country’s reserves and once the reserves are affected it has a negative impact on the country exchange rate increasing the cost of production.

 “ The central bank doesn’t have control on the change in crude oil prices, and to make an estimation of two years is over ambitious given that the current stable variables may experience instability owing to unforeseen certainties leading to the exchange rate being disrupted and increased domestic fuel prices”, said Notulu.

 He mentioned that currently the country has not yet experienced serious shocks in terms of the USA-Iran conflict due to the fact most countries stockpiled crude oil and also due to future contracts made earlier on the purchase of oil.

 “ Countries stockpiled crude oil and made what is known as future contracts where agreements were already made In terms of future purchases of crude oil and that has edged the risks and that’s why the overall effect in terms of cost has not been felt significantly, “said Notulu.

 Notulu noted that already government reported losing about $200 million which was waived off and if not made could have seen fuel prices increasing and the country’s production, distribution and could have affected consumptions and alternatively increased prices of goods.

 “When crude oil prices increase it affects the country’s production, distribution, affects consumption and alternatively increases prices of goods and in any sector that you would want to focus on will be affected if crude oil prices increase”, said Notulu.

He added that when crude oil prices are increased it affects the country’s reserves because the reserves are met to keep the Kwacha in check in terms value which it holds but  if the reserves begin to reduce it basically means the Kwacha also begins to lose value and when the Kwacha depreciated it makes it becomes costly to import goods of which the cost is then passed on to the consumer and cause prices to increase.

Article by Justine Phiri