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Annual inflation held at 6.5 per cent in July, half its year-ago level, underpinned by the world’s best-performing currency in 2026. But growth is losing momentum outside the first quarter’s agricultural rebound, and the primary surplus is shrinking eleven days before the August 13 election.

LUSAKA – The Zambia Statistics Agency (ZamStats) confirmed on July 30 that annual inflation held at 6.5 per cent in July 2026, matching June’s reading and equalling the lowest level since February 2018. The year-on-year comparison is the number that stands out: in July 2025 prices were rising 13.0 per cent annually (exactly double), with food inflation at 15.3 per cent and non-food inflation at 9.7 per cent. Twelve months on, the positions have flipped: food inflation has slowed to 6.4 per cent, while non-food inflation has accelerated to 6.7 per cent, the highest reading since disinflation began.

The geography of the index is equally telling. According to ZamStats statistician-general Sheila Mudenda, Lusaka province contributed 2.5 percentage points to the national rate (by far the largest share), with a provincial rate of 8.7 per cent, followed by the Copperbelt (5.9 per cent, 1.3 points). At the other extreme, Luapula registered just 3.9 per cent. The national reading nonetheless sits comfortably within the 6-8 per cent corridor targeted by the Bank of Zambia (BoZ).

Economist Kelvin Chisanga, speaking to local newspaper The Mast, calls the twin readings of 6.5 per cent in June and July the clearest sign yet that the government’s macroeconomic stabilisation programme is beginning to pay off. Chisanga notes that the rate has halved from July 2025’s 13.0 per cent even as the country posts 7.7 per cent GDP growth, $6.5bn in international reserves and a kwacha holding steady at around 18.39 to the dollar. “Households benefit from improved purchasing power, businesses gain greater certainty for planning and investment, while government and financial institutions operate in a more stable economic environment,” Chisanga told The Mast.

The kwacha, not the central bank, is doing the disinflationary work

Chisanga credits the improvement to the stabilisation programme as a whole. Market data, however, point to a narrower channel: it is not so much BoZ monetary policy as the exchange rate that is doing the heavy lifting. The kwacha has gained roughly 18 per cent against the dollar since the start of 2026, making it one of the best performers in the world on Bloomberg’s currency scorecard, after already appreciating 31 per cent between December 2024 (27.58/USD) and February 2026 (18.90/USD). The rate ranged between 18.3 and 19.0 kwacha per dollar through the first half of the year. In an import-dependent economy, a stronger currency directly lowers the cost of imported goods, the principal channel through which non-food inflation is transmitted.

The currency’s strength is, in turn, anchored in copper: the metal broke above $13,000 a tonne on the London Metal Exchange in January 2026 and closed the first week of July at $13,326 a tonne, near record highs. With copper accounting for roughly 70 per cent of export revenue, the link between the metal’s price, currency strength and imported inflation has become the central axis of the country’s macroeconomic story. It is also its biggest vulnerability: any sharp correction in copper would simultaneously reverse both the currency and the inflation gains.

The counterpoint sits precisely in the non-food basket: furniture, paraffin, charcoal and vehicle purchases drove the rise from 6.0 to 6.7 per cent. These are line items sensitive to global energy prices, and Zambia is not immune to what the IMF, in its April 2026 Regional Economic Outlook for Sub-Saharan Africa, describes as a regional disinflation reversal: all ten of the continent’s largest economies recorded higher inflation in the first half of 2026 than in the same period of 2025, largely on the back of higher fuel costs linked to the conflict in Iran.

Growth running at two speeds

Gross domestic product grew 7.7 per cent year-on-year in the first quarter of 2026, a figure government officials have cited as evidence of broad-based recovery. The sectoral breakdown, however, points to a narrow base: agriculture, forestry and fishing (+21.4 per cent, the rebound after years of drought), information and communication (+11.0 per cent), transport and storage (+9.5 per cent) and accommodation and food services (+9.1 per cent) were almost the sole drivers.

Mining, historically the backbone of the Zambian economy, has not kept pace. Copper output rose 8 per cent in 2025 to 890,346 tonnes, missing the official 1-million-tonne target, and the ambition of reaching 3 million tonnes a year by 2031 remains a distant prospect. That is why full-year 2026 growth forecasts have been revised down to around 4.3 per cent, well short of the first quarter’s 7.7 per cent pace: the agricultural base effect fades over the course of the year, while mining continues to disappoint.

Trade data confirm the loss of momentum. Cumulative trade between January and June 2026 totalled K304.0 billion, a 6.0 per cent decline from K323.5 billion in the same period of 2025. June’s trade surplus narrowed to K4.2 billion, down from K7.0 billion in May, with exports falling 1.6 per cent month-on-month and imports rising 10.2 per cent, driven by a 57.1 per cent jump in consumer-goods imports, a classic signal of pre-election demand.

The fiscal bill before the ballot

On sovereign debt, Zambia has locked in the bulk of the restructuring negotiated under the G20 Common Framework: roughly 94 per cent of the restructuring perimeter is now covered by five bilateral creditor agreements, and the IMF completed the sixth and final review of its Extended Credit Facility (ECF) in January 2026, formally closing out the programme. International reserves have reached a record high of about $6.4bn-$6.5bn, equivalent to 4.4 months of import cover, a robust buffer against currency shocks.

The IMF itself, however, flagged a structural problem: the primary surplus projection for 2026 was revised down from 3.8 per cent of GDP (the figure presented at the sixth review) to just 1.1 per cent of GDP, reflecting mounting fiscal pressure ahead of the August 13 general election, in which President Hakainde Hichilema is seeking a second term. The central bank has already cut its policy rate by 25 basis points, even after the IMF recommended “further calibration” given rising fuel prices and global uncertainty, a combination of looser monetary policy and more expansionary fiscal policy in an election year that markets tend to scrutinise closely.

Zambia against its regional peers

Set alongside the region’s largest economies, Zambia stands out as a positive outlier on a continent where disinflation is, on the whole, going into reverse:

Sources: ZamStats; Nairametrics; Ghanamma; NewZimbabwe; IMF, Regional Economic Outlook: Sub-Saharan Africa, April 2026.

Legal and regulatory implications

The divergence between food and non-food inflation carries concrete contractual consequences. Public procurement contracts and supply agreements indexed to specific CPI subcomponents (rather than the headline index) could give rise to repricing disputes, precisely because the non-food component (6.7 per cent) now runs above the food component (6.4 per cent), a reversal of the pattern seen a year ago.

In mining, copper prices above $13,000 a tonne are reviving the debate over “royalty arithmetic”: whether the applicable fiscal regime (ad valorem or sliding-scale) allows the state to capture its share of the metal’s appreciation, remains a live point of contention between mining operators and the Zambia Revenue Authority.

Completion of 94 per cent of the debt restructuring substantially reduces the creditor-litigation risk that characterised the post-default period of 2020-23, but the roughly 6 per cent of the perimeter still not covered by a bilateral agreement keeps a residual risk of hold-out creditor litigation, in line with cases seen in other African sovereign restructurings.

Finally, the fiscal loosening implicit in the primary surplus cut from 3.8 to 1.1 per cent of GDP is the classic pre-election legal risk: a higher probability of irregularities in public contracts, the reintroduction of subsidies (particularly on fuel, should global prices keep rising), and potential administrative-law challenges to price-control measures adopted under political pressure ahead of August 13.

What to watch from here

Chisanga has urged the authorities to lock in these gains through fiscal discipline, policy consistency and continued private-sector-led growth, precisely the prescription now being tested by the primary surplus’s downward revision, from 3.8 to 1.1 per cent of GDP, on the road to the August 13 election. Four variables will determine whether the current stability endures or is merely the calm before the storm: the outcome of the election and whether the IMF-aligned fiscal discipline Chisanga advocates survives it; the trajectory of global oil prices, with geopolitical risk tied to Iran pressuring the non-food component; the sustainability of the copper price, on which both growth and the currency now depend; and whether the BoZ pauses further rate cuts, given the IMF’s stated preference for a more cautious monetary calibration.