Zambia’s President Sets New Economic Path
After a decade of economic instability, the new Zambian president has decided to implement a recovery plan that promises to reduce the national debt, revive the mining industry, and more. Come learn more about this ambitious plan!
Since his election in August, Zambian President Hakainde Hichilema and his administration have benefited from favorable investor opinions. In fact, Zambian Kwacha and dollar bonds have been the highest performing assets of their kind in the weeks following his election.
The Recovery Plan for Zambia's Economy
The President's pick of economist Situmbeko Musokotwane to be Finance Minister has also impressed observers. Remarkably, the new Zambian administration has prioritized a financing deal with the International Monetary Fund (IMF), paying off $13 billion in debts, reviewing agricultural policies, reforming state power firm Zesco, and increasing foreign investment.
The Finance Minister plans to double copper production by 2026 to two million metric tons. Copper prices have been increasing due to a resurgent world economy, from $4,830 per metric tonne on April 5th, 2020, to $9,139 per metric tonne on September 21, 2021. This hike is due to short-term pandemic-related supply disruptions and increasing demand from electronics, semiconductors, and the green industry. The IMF and World Bank estimate that the price will stay above $7,600 per metric tonne in 2022.
Obstacles for the Current Administration
The nation has had a problematic decade regarding the economy. For example, the previous administration clashed with mining companies, which held back the industry's development, especially when copper accounts for 70% of the countries' exports. This sector was stagnant as the government argued with miners over $1.5 billion in tax refunds it owed, and the Kwacha suffered during this period. In 2011, it was 5.10 to a dollar and reached a record low of 22.68 this year, meaning annual inflation of 25% in July—the highest in nearly 20 years.
At his inauguration on August 24th, President Hichilema pledged to stabilize the country's finances and reign in its spending. Zambia took on much debt during the last presidency and was the first African nation to default on its sovereign debt since the COVID-19 pandemic struck.
To fulfill his promises, President Hichilema will have to make tough decisions, such as reducing subsidies on fuel and agriculture inputs. Making such reforms will be difficult for an electorate that is struggling with the high living cost.
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