This annual inflation outturn was largely attributed to the decline in annual food inflation to 2.8% from 3.8% recorded in June 2010, as annual non-food inflation rose to 12.5% from 11.8% during the same period. Food inflation Quarterly food inflation rose to –0.1% in September 2010 from the –1.7% recorded in the previous quarter, but was 1.0 percentage point below the 0.9% recorded during the third quarter of 2009. This was due to higher prices of rice, various beef products, pork chops, mutton, fresh kapenta, dried kapenta, carrots, green beans, groundnuts and cassava tubers during the quarter under review. This was attributed to the impact of the upward adjustment of transport charges in July 2010 on the commodity market. Annual food inflation fell on account of price reductions on cereals, various vegetables, groundnuts, tubers, beef products (fillet steak, rump steak), mutton and dried kapenta, due to improved seasonal supply factors. Non-food inflation Quarterly non-food inflation slowed down to 3.2% from the 3.7% observed in June 2010, but was 0.7 percentage points above the 2.5% recorded in the third quarter of 2009. This was mainly attributed to lower quarterly inflation for the following sub-groups: Furniture and household goods of 4.5% [7.5%], Medical care 1.6% [2.7%], Transport and communications 0.9% [5.1%], Recreation and Education –0.1% [1.3%], and other goods and services 1.7% [2.8%]. However, on an annual basis, non-food inflation increased to 12.5% from the 11.8% registered in June 2010.
The volume and value of cheques returned unpaid on account of insufficiently funded accounts continued to decrease following the issuance of the directives on dishonoured cheques and direct debit instructions by the Bank of Zambia in the second quarter of 2010. The volume of unpaid cheques decreased by 15% to 4,202 (Quarter 2: 4,929). The public is advised to ensure that they have sufficient funds on their accounts whenever they issue cheques in order to avoid charges. Economic reform programme An IMF Mission was in Zambia from 2nd to 15th September, and 28th October to 3rd November 2010, to conduct the 5th Review under the Extended Credit Facility (ECF) arrangement. Overall, the mission was satisfied with the programme performance and reached agreement with the Zambian authorities on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011. The policies and structural measures would pave the way for the completion of the Fifth Review of the ECF arrangement, subject to approval by the IMF’s Executive Board. 4  BIS Review 148/2010  Total disbursed poverty reduction budget support (PRBS) in the third quarter of 2010 amounted to US $ million from the World Bank. A total of US $ million mining tax revenue was received while the Bank of Zambia foreign exchange purchases from the market amounted to US $ million. Preliminary data indicate that the quantitative performance criteria under the Extended Credit Facility (ECF) arrangement were observed as at end-September 2010 and that all structural benchmarks were generally on track.