LUSAKA, Zambia

Zambia ended 2021 with a record low 16.4% inflation rate, the lowest since October 2020.

Musepa Mulenga, interim statistician-general of the Zambia Statistics Agency, said consumer prices rose 16.4% from a year earlier, compared with 19.3% in November.

"The drop in the rate was driven by food-price growth that slowed to a 13-month low of 19.9% in December, compared with 25.4% in the prior month and non-food inflation decelerating to 12.1% from 12.2% in November," Mulenga told reporters in the capital Lusaka on Thursday, adding "costs rose 0.6% in the month."

A sustained slowdown in inflation is key for Africa's second top copper producer, whose economy worsened due to an external debt of $16 billion and the negative effects of the COVID-19 pandemic.

A new government led by President Hakainde Hichilema was elected in August against the backdrop of a strong campaign message to fix the economy and restore fiscal health.

Just a few months into office, Hichilema's administration secured a staff level agreement for a $1.4 billion economic structural adjustment program with the International Monetary Fund (IMF).

Pending board approval and as part of the deal, the country this month increased pump prices by a fifth after scrapping fuel subsidies that kept costs artificially stable for two years.

Gasoline and diesel prices will also be reviewed every 30 days instead of bimonthly, in addition to an impending 13% increase in electricity prices.

"The deal comes with short-term harsh conditions, and while the year 2022 may be harder, come 2023, the people of Zambia will appreciate us and say ‘well done New Dawn government,’" Felix Mutati, an ex-finance minister now in a different portfolio under Hichilema's administration, told state television recently.

The local currency the kwacha, the second-best performing currency globally this year, is closing the year with a gain of nearly 7% against the US dollar, with the central bank projecting inflation to average 15% next year and 9.3% in the first three quarters of 2023.

The long-term odds for the country's economy remain bright, especially if Hichilema's administration sticks to its campaign promise of rooting out government corruption and prudently spending public resources.