SINGLE DIGIT INFLATION IS NOT A LIE, IT’S A SPEEDOMETER,  WHY IRIS KAINGU IS CONFUSING THE PRICE LEVEL WITH THE RATE OF CHANGE

SINGLE DIGIT INFLATION IS NOT A LIE, IT’S A SPEEDOMETER,  WHY IRIS KAINGU IS CONFUSING THE PRICE LEVEL WITH THE RATE OF CHANGE.

By: Chadrin Nseemani

I just saw a video of Iris Kaingu speaking and I must state that, with all due respect to Iris Kaingu, telling President Hakainde Hichilema that single-digit inflation does not make sense while the cost of living is high is precisely the kind of popular but economically illiterate argument that keeps Zambia trapped in economic populism.

Both statements can be true at the same time, and in fact they are. Inflation at 9.4% does not mean things are cheap, it means things are getting expensive more slowly. This is basic macroeconomics. The cost of living is the price level, inflation is the rate of change of that price level. When Zambia lived through 20% plus inflation, drought-driven food shocks, a collapsed Kwacha and fuel price adjustments, the price level rose dramatically and stayed there.

Moving from 15% inflation to 9% inflation does not bring prices back to where they were in 2021, it means the bleeding has slowed. To demand that prices fall back is to demand deflation, and deflation is far more dangerous than high prices because it destroys production, jobs and incomes.

What Madam Kaingu misses is that single-digit inflation is not an end in itself, it is the precondition for everything else that will eventually reduce the cost of living. High and volatile double-digit inflation destroys planning. Businesses cannot price, farmers cannot store, the Kwacha cannot hold value, and interest rates must stay punitively high to compensate for risk.

When inflation stabilises in single digits, expectations stabilise, the Bank of Zambia can begin to ease monetary policy, lending rates can gradually come down, the exchange rate finds a floor, and imported inputs like fuel and fertilizer stop transmitting new shocks every month. That is exactly what we are seeing. It does not put money in pockets tomorrow morning, as economist Lubinda Haabazoka correctly noted, because wages always adjust with a lag after a prolonged inflationary episode.

Your salary has not caught up to the cumulative 80% price increase of the last four years, so you still feel squeezed even if this month’s increase was only 9%. That is painful, but it is not proof that the figure is fake, it is proof that disinflation takes time to be felt.

If we are honest, the cost of living will not fall because the President announces lower inflation, it will fall when we address the structural drivers that sit behind the price level, which this administration is actually doing.

Debt restructuring to stop bleeding forex, increased mining output to bring dollars in, winter maize and expanded irrigation to break food price seasonality, and fuel procurement reforms to reduce the cost of doing business. None of that works in a 20% inflation environment.

So to mock single-digit inflation as meaningless is to mock the very foundation on which affordability can be rebuilt. The question to Iris Kaingu should not be why inflation is single digit while mealie meal is still expensive, but what alternative she proposes, should we return to double-digit inflation so that at least the numbers match our pain?