By The Economist Churchill Luhanga
The latest announcement that Zambia’s annual inflation rate has eased to 6.5 percent has opened fresh discussion over whether official economic indicators reflect the pressures being experienced by households and businesses, after financial analyst Yusuf Dodia questioned the latest figures and linked his concerns to commercial bank lending rates.
Speaking in an interview in Lusaka, Mr Dodia challenged the inflation rate published by the Zambia Statistics Agency (ZAMSTATS), arguing that prevailing lending rates in the banking sector point to a much higher level of inflation than the official data suggests.
ZAMSTATS announced on Thursday that annual inflation had eased from 6.6 percent in May to 6.5 percent in June 2026, extending the gradual downward movement recorded over recent months.
Mr Dodia, however, maintained that commercial banks appear to be pricing risk very differently.
He noted that many commercial banks are currently offering loans at interest rates ranging between 20 and 25 percent. Based on what he described as the traditional practice of banks lending at roughly five percentage points above inflation, he argued that the banking sector is effectively operating as though inflation is closer to 20 percent than the officially reported 6.5 percent.
“Normally banks give loans at about five percent above inflation, meaning the banking system in Zambia has determined that inflation is running at 20 percent for them to get an interest rate of 25 percent,” Mr Dodia said.
He added that the gap between official inflation and prevailing lending rates suggests that financial institutions have limited confidence in the published inflation figure and that many businesses and consumers continue to experience economic conditions that differ from the official statistics.
His remarks quickly attracted varied responses from economists, finance professionals and members of the public, with many agreeing that households continue to feel pressure despite the decline in headline inflation.
Some commentators said the reduction from 6.6 percent to 6.5 percent does not necessarily mean goods have become cheaper.
Instead, they explained that inflation measures the pace at which prices are increasing. A lower inflation rate simply means prices are still rising, but at a slower rate than before.
Using a simple illustration, they noted that an item costing K100 a year ago would now cost about K106.50 under an annual inflation rate of 6.5 percent.
Others argued that many consumers continue to experience pressure because prices remain well above previous levels, even though the rate of increase has moderated.
Among those supporting Mr Dodia’s position was economist Adon Kalapula Banda, who said the observations deserved serious consideration.
Mr Banda described Mr Dodia as an accomplished economist and said commercial banks are highly strategic when assessing lending conditions.
He argued that lending rates should not appear excessively disconnected from a country’s reported inflation rate.
“Banks are in business and are very strategic when lending money to their clients,” Mr Banda said, describing the analysis as impartial.
Not everyone agreed with the conclusions drawn from commercial lending rates.
Financial commentator Roystrings Mutombo said the comparison between bank interest rates and inflation oversimplified how lending rates are determined.
He argued that while inflation forms part of the broader economic environment, commercial banks consider several additional factors before deciding what interest to charge borrowers.
Mr Mutombo explained that central banks establish the macroeconomic foundation through monetary policy and benchmark rates, but commercial banks subsequently adjust lending rates based on their own cost structures and commercial assessments.
According to him, banks must recover the cost of funds, account for the interest paid to depositors, cover operational expenses, assess the creditworthiness of borrowers, consider the duration of loans and respond to competition within the financial sector.
He said lending rates therefore reflect much more than inflation alone.
“The central bank sets the macroeconomic baseline, while commercial banks adjust actual rates based on market conditions and individual borrower risk,” Mr Mutombo explained.
He added that higher lending rates may result from elevated credit risk, operating costs, funding expenses or long-term lending uncertainty rather than indicating that banks have privately rejected the official inflation figure.
His comments suggested that a direct comparison between inflation and commercial lending rates may not fully capture how banks price loans.
The differing perspectives have highlighted the distinction between headline inflation, which measures the average movement in consumer prices across the economy, and the wider financial conditions faced by businesses seeking credit or households attempting to access loans.
While official inflation has continued to decline gradually, borrowing costs remain considerably higher, raising questions for many consumers about why access to credit has not become substantially cheaper.
The discussion has also underscored the difference between statistical measurements produced by national agencies and the everyday experiences of households whose spending decisions are shaped by food prices, transport costs, utility bills and the cost of borrowing.
For some, the latest inflation figures point to continued progress in slowing price growth.
For others, including Mr Dodia, the persistence of relatively high lending rates raises questions about whether the broader economy is experiencing the same improvement reflected in the official statistics.
Although the competing explanations approach the issue from different angles, they converge on one point: inflation figures and commercial lending rates measure different aspects of the economy, leaving room for continued discussion over how best to interpret Zambia’s current economic conditions.
