Firm sees inflation surge, kwacha depreciation

Local portfolio investment and advisory firm, Nico Asset Managers has warned that the onset of the lean season will likely to exert pressure on inflation and affect the resilience of the kwacha in  the short to medium-term.

This is contrary to  fiscal and monetary authorities projections which, among others, show that inflation rate will continue to drop, the exchange rate will remain stable, foreign exchange reserves will likely surpass the 3.7 months import cover.

In its monthly economic review for August 2019, Nico Asset Managers said it is expected that food inflation rate, which was recorded at 9.3 percent in July,  will continue to increase due to the lean season expected to begin this month.

According to the firm, food inflation rate will likely be significant to push headline inflation, currently at 9.3 percent, according to the National Statistical Office (NSO).

The firm also noted that the kwacha will likely depreciate in the medium -term due to the significant current account deficits and weak foreign direct investment inflows.

Reads the report in part: “A stable exchange rate makes the cost of imports predictable in the short-term. However, the depreciation of the kwacha in the medium to long-term could lead to higher import costs and relatively cheap domestic exports on the international market.”

RBM governor Dalitso Kabambe is on record as having said that the kwacha   will continue to be stable.