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Zambians pay the price for government’s default as food prices spiral

By David Whitehouse
Posted on Monday, 19 April 2021 17:00

Justina Kabuli and her son Andrew, both HIV-positive, remove weeds from their field of sweet potato crops during a visit by a home-based care team to their home in Chiyobola
Justina Kabuli and her 12-year-old son Andrew, remove weeds from their field of sweet potato crops on February 21, 2015. REUTERS/Darrin Zammit Lupi

The population of Zambia is paying the price for Zambia’s sovereign default – when the government missed a payment on its debt – in November 2020. The most direct impact is in the form of higher food prices.

Overall annual inflation climbed to 22.8% in March from 22.2% in February, driven by food inflation, which jumped to 27.8%.

The higher prices result from a loss of confidence in the kwacha, says Shani Smit, an economist at NKC African Economics in South Africa. Since October, food-price inflation has soared by more than 13%, she notes. “One of the main drivers behind the rise in food price inflation was kwacha weakness.”

Headline inflation is likely to peak in April and then gradually slow, Smit says. Reasons for optimism are the harvest season starting in April and the government’s decision not to charge value-added tax on fuel imports, she says.