Zambia’s Falling Economy

Zambia‘s economy is one going through what I would call a turbulent moment. It is a country with a lot of natural resources, but things don’t just seem to go right somewhere.
To start with, within three years, the Zambian kwacha has depreciated by about 54%, from $4.86 to the current $7.46 a dollar. Government has labored to explain that the depreciation is largely on account of the persistent weak copper prices and the global strengthening of the US dollar.
Zambia’s extremal debt currently stands at about US$4.8 billion representing about 18.5 percent of GDP while the domestic debt is K20.5 billion (approximately US$3.7 billion) representing about 14.2 percent of GDP. Total public debt is therefore around 32.7 percent of GDP. In 2011 when the new government was taking over the reins of power, foreign debt was at $1.2 billion.
At the presentation of the 2015 national budget, government had projected a budget deficit of about K8.5 billion but currently that amount has been revised upwards to K20 billion.
GDP growth rate was projected at 7 but is now expected to be 5.8% in 2015.
In the light of electricity load shedding in the second half of the year, the economic activities are expected to be curtailed and lower output will be a result. The growth rate may be even 5%!  Fitch, the rating agency has put it at 5.3%
Trade deficit has gone up as we are importing more than we are exporting. Zambia recorded a trade deficit valued at K 1,293.2 million in June 2015 from a trade deficit of K 1, 210.0 million recorded in May 2015. This is the highest trade balance in the year with the lowest being that of January valued at K 52.4 million.
The business confidence in the country has gown down as the economic management of the country is viewed as flawed. The rating agencies like Moody’s, Fitch, Standard and Poor have all downgraded Zambia’s current rating to B, which means it is not a good investment destination as it is five levels below investment grade.
One of the major problems that the country has faced since Patriotic Front came into power is the lack of consultation with economic stakeholders when major policy changes are planned.
Not until drastic measures are taken, the country may be headed for deeper waters.

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