Zambia expects economy to grow 4% in medium-term, president says

Reuters | The Zambian government expects its economy to grow at 4 percent per year in the medium term and is focused on resolving the country’s debt crisis, President Hakainde Hichilema said on Friday.

According to the Bank of Zambia, the economy grew 3.6 percent in 2021 after a 2.8 percent contraction in 2020, when Zambia became the first African country to default on its sovereign debt during the COVID-19 pandemic.

“We have put our economy on a positive growth trajectory in the last 12 months and we project the economy to bottom up from this negative growth,” Hichilema told parliament, and forecast an economic expansion of 4 percent in the medium term.

“Fiscal management was excessively deficient and was characterized by poor resource allocation and reckless borrowing, which increased the cost of debt service resulting, unfortunately in a debt default,” Hichilema said.

However, the government has managed to stabilize the economy within one year, the president added.

“We have consistently subdued inflation,” Hichilema said.

Inflation stood at 24.4 percent in August 2021 but fell to a single digit of 9.8 percent as at August 2022, the official statistics agency, Zamstat said.

Hichilema said this had put Zambia “on a course to achieving our targeted inflation rate of 6-8 percent for the medium term.”

The kwacha currency was stable and foreign exchange reserves were up, he said.

The southern African country is seeking US$8.4 billion of “cash debt relief” from 2022 to 2025, the International Monetary Fund (IMF) said on Tuesday in a long-awaited report, adding that it needs to bring down its debt service-to-revenue ratio to 14 percent by 2025 and then maintain that level on average until 2031, compared to 61 percent now.

In late August, the IMF approved a US$1.3 billion, 3-year loan to Zambia, a crucial step in the southern African country’s quest to restructure its debts.