Inflation in Zambia in 2025: A Year in Review
As 2025 draws to a close, Zambia's economy has shown notable resilience in taming inflation, which started the year at elevated levels but steadily declined amid favorable domestic and external factors. The annual inflation rate, measured by the consumer price index (CPI), began at 16.7% in January and fell to 10.9% by November, marking the lowest level since August 2023. This downward trajectory reflects a combination of strengthened currency, improved agricultural output, and declining global commodity prices, all supported by prudent monetary policy from the Bank of Zambia (BoZ). This article reviews the key inflation trends throughout the year, the underlying drivers, and the central bank's policy responses.
Inflation Trends: A Steady Decline
Zambia's inflation exhibited a clear cooling pattern in 2025, with the rate peaking in the first quarter before easing progressively. The year-to-date average through November stood at around 13.3%, aligning closely with projections from the BoZ and international bodies like the International Monetary Fund (IMF), which forecasted an annual average of 14.2%.
Here's a month-by-month breakdown of the year-over-year inflation rates based on official data from the Zambia Statistics Agency (ZamStats) and other sources:
Month | Inflation Rate (%) | Key Notes |
|---|---|---|
January | 16.7 | Remained stable from late 2024, driven by persistent food price pressures. |
February | ~16.7 | High non-food inflation from fuel and transport costs; exact figure aligned with Q1 average. |
March | ~16.7 | Q1 average of 16.7%, with food inflation at 19.6% contributing heavily. |
April | 16.5 | Slight dip as maize supplies improved; food inflation began easing. |
May | 15.3 | Continued slowdown, offering relief to consumers; 1.2 percentage point drop from April. |
June | 14.1 | Kwacha rally contributed to a 14-month low; non-food inflation fell to 11.8%. |
July | 13.0 | Sharp decline due to lower maize prices (down 43.7% year-on-year) and fuel reductions. |
August | 12.6 | Monthly inflation at 0.5%; improved supply chains and currency strength. |
September | 12.3 | 24-month low, propelled by Kwacha appreciation; BoZ projects return to target in Q1 2026. |
October | 11.9 | Food inflation at 0.4% monthly; overall easing amid lower transport costs. |
November | 10.9 | Lowest since 2023; driven by fuel price drops and stable exchange rates. |
The quarterly averages highlight the momentum: Q1 at 16.7%, Q2 at 15.3%, and a further drop in Q3 to around 12.6%. By Q4, inflation had entered single digits in effective terms, signaling a successful disinflation process.
Key Drivers of Inflation in 2025
Several factors contributed to the inflation dynamics this year. On the positive side, the Zambian Kwacha strengthened significantly, recovering from early weaknesses to average around 22.98 ZMW per USD for the year. This appreciation—up 14.4% in Q2 alone—reduced import costs, particularly for fuel and non-food items. Petrol, diesel, and kerosene prices fell by 10.3%, 22.4%, and 16.1% respectively in Q2, directly lowering non-food inflation.
Food inflation, which accounted for over 60% of the CPI basket, eased due to a bumper maize harvest of 4.04 million metric tonnes, yielding a surplus of 501,621 tonnes. Maize grain prices dropped 43.7% year-on-year, while base effects from prior vegetable and sugar price spikes dissipated. Global commodity trends also helped, with crude oil prices declining to $68.62 per barrel and wheat/maize prices falling.
However, challenges persisted, including geopolitical tensions affecting global trade and potential weather risks to agriculture. Despite these, fiscal reforms and revenue mobilization supported a downward trend in the cash deficit, indirectly aiding price stability.
Monetary Policy Responses
The Bank of Zambia adopted a cautious, tight monetary stance throughout most of 2025 to anchor inflation expectations and support the Kwacha. The Monetary Policy Committee (MPC) met quarterly, with decisions as follows:
February 2025: Raised the policy rate by 50 basis points to 14.5% from 14.0% (set in late 2024), responding to high inflation at 16.7% and aiming to curb pressures through the exchange rate channel.
May 2025: Maintained the rate at 14.5%, noting an expected slowdown but emphasizing the need to consolidate gains amid uncertainties.
August 2025: Held steady at 14.5%, as inflation remained above the 6-8% target band, with projections for entry into the band by Q1 2026.
November 2025: Cut the rate by 25 basis points to 14.25%, the first reduction in five years, reflecting sustained disinflation and improved economic prospects post-debt restructuring.
These actions were complemented by other tools, such as open market operations to keep the overnight interbank rate within a ±1% corridor of the policy rate, and foreign exchange guidelines for transparency. The BoZ's strategy helped influence reserve money growth (projected at 7.8%) and supported financial stability. Additionally, the IMF's approval of the sixth and final review under Zambia's Extended Credit Facility in December 2025, disbursing about $190 million, underscored international confidence in these policies.
Outlook and Implications
Looking ahead, the BoZ anticipates inflation averaging 7.7% in 2026, firmly within the 6-8% target by early that year. Economic growth is projected at 5.6% for 2025-2026, bolstered by mining, tourism, and trade sectors. Risks include global trade disruptions and climate events, but ongoing fiscal discipline and copper price gains (to $9,553.50/tonne) offer upside potential.
In summary, 2025 marked a pivotal year for Zambia's fight against inflation, with effective monetary policy playing a central role in achieving stability. As the country builds on these gains, sustained reforms will be key to fostering inclusive growth and protecting vulnerable households from price volatility.