(Bloomberg) -- Zambia’s annual inflation rate jumped to a 29-month high in June and the economy grew at its slowest pace in two years as the southern African nation continues battling the effects of an El Niño-induced drought, the worst in almost six decades.
Consumer prices rose 15.2%, compared with 14.7% in May driven by higher costs of corn meal, cereals and spirits, Statistician General Goodson Sinyenga told reporters in Ndola, - 316 kilometers (196 miles) north of Lusaka, the capital - Thursday. The economy expanded 2.2% in the first quarter from 8.5% in the prior three months.
The dry spell has withered crops, stoking food prices and forcing the nation to increase costly imports. Annual food inflation accelerated to 16.8% from 16.2% last month and non-food price growth advanced to 13% versus 12.7% in May.
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The extreme weather has also hindered the central bank’s efforts to bring inflation back to its target of 6% to 8%. Policymakers have hiked interest rates by 450 basis points since February last year to 13.5%.
The International Monetary Fund urged them in a statement on Wednesday to maintain “a tight monetary stance until inflation declines toward the Bank of Zambia’s target range” to help anchor inflation expectations.
The drought has also crippled hydro-power generation, leading to rolling blackouts lasting more than half a day. To mitigate the shortfall the country is importing 188 megawatts from neighboring Mozambique and cut electricity exports by almost half to 281 megawatts, state-owned power utility Zesco Ltd. said on Monday.
Last week, Finance Minister Situmbeko Musokotwane announced a 41.9 billion kwacha ($1.6 billion) supplementary budget, part of which will go to dealing with the aftermath of the drought.
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