On December 24, 2025, Zambia’s inflation rate accelerated to 11.2% year-on-year in December, as reported by Acting Statistician-General Sheila Mudenda in Lusaka. This increase occurred despite the country’s currency, the kwacha, strengthening by 23% against the US dollar over the past year. The kwacha’s gains were primarily driven by increased foreign exchange inflows linked to buoyant global copper prices, a key export for the copper-dependent economy.

Dissecting Zambia’s Inflation: Food Prices Soften, Non-Food Costs Surge

Although overall inflation rose, the components show contrasting trends. Food inflation moderated, decreasing to 12.9% from 13.9% in November, offering some respite amid persistent cost pressures on households. In contrast, non-food inflation climbed significantly to 8.7% from 6.6%, fueled by rising prices in fuel and air transport sectors. These non-food categories contributed heavily to the inflation uptrend, overshadowing the moderating impact of the kwacha’s appreciation.

The monthly inflation rate for December was recorded at 1.5%, underscoring ongoing inflation challenges across the economy. This mixed inflation picture reflects both domestic and external factors that keep upward pressure on prices, despite the currency’s strength.

Kwacha Strength vs. Inflation: A Complex Dynamic

The 23% appreciation of the kwacha throughout 2025 has been credited to greater foreign currency inflows from surging copper prices in international markets. As a major global copper producer, Zambia’s economy is closely tied to commodity movements. Typically, a stronger local currency helps dampen inflation by lowering import costs. However, the December data indicates that this effect has only partly offset inflation drivers.

Particularly, rising energy prices, including fuel, and higher air transport costs have pushed non-food inflation upward. These factors complicate the Bank of Zambia’s task of balancing inflation control with supporting economic growth. The data underlines that currency appreciation alone cannot fully contain inflation pressures where external cost shocks prevail.

Inflation: Market Outlook

The acceleration of Zambia’s inflation rate to 11.2% at year-end 2025 poses challenges for investors and policymakers alike. Despite the kwacha’s strengthening, inflation remains entrenched, especially in non-food sectors contributing to cost volatility. The divergent trends in food and non-food inflation suggest that consumer price dynamics will stay volatile in the near term.

For market watchers, the relationship between Zambia’s currency movements and inflation trends will be critical in early 2026. Given the dominance of the copper sector and mounting energy-related cost pressures, inflation management will require vigilant monitoring and calibrated policy responses going forward.