Thursday, June 20, 2024

Zambia's Economic Performance in 2022 was a Mixed Bag – An Independent Analysis


” The Economy Stabilized, but grew at a Slower rate than 2021″

?By Mwansa Chalwe Snr

The first full year of the New Dawn administration being in charge of the Zambian economy was 2022.It is now appropriate to objectively review their performance for the year. According to government critics, the UPND have poorly run the economy. The government, on the other hand, have argued that they have turned around the economy that was run down by the Patriotic Front (PF)’s ten years of mismanagement. This article assess Zambia’s economic performance for 2022, in a non-technical language, and without any political bias. It is based on facts and figures and devoid of any sugar coating.

Economic Stabilization and Market Confidence

In the 16 months that the UPND has been in power, from August, 2021 to December, 2022, they have recorded a number of economic achievements. They have reduced inflation from 24% to 9.9%; reduced the exchange rate from K24 to K18 to a US Dollar; maintained the benchmark monetary policy rate at 9% for four consecutive quarters; reined in wasteful government expenditure and brought in fiscal discipline; increased the gross foreign exchange reserves from $ 2.9 billion to $3.1 billion; reduced the treasury bill rate from 18% to 14%; improved local and foreign investors’ confidence, resulting in more foreign exchange inflows.??In view of the positive downward trend in inflation, the kwacha appreciation, the maintenance of the monetary policy rate at 9% and the stable macro-economic environment, it was expected that bank borrowing rates would also go down. But surprisingly, the average borrowing rate, still remains at 25.2% without any reduction. This should concern authorities. The only bank that reduced its rates was Standard Chartered Bank Zambia. It dropped its interest rates on mortgages from 24.5% to 16% and for personal loans from 29% to 23% with effect from 15th August 2022 for all new bookings. ??Zambia’s economic performance has been praised by the International Monetary Fund (IMF) staff team, led by Ms. Allison Holland, Mission Chief for Zambia, who visited Zambia from November 30 to December 7, 2022.
“During the visit we discussed recent macroeconomic and financial sector developments. Against an increasingly challenging global economic backdrop, the Zambian economy appears to have remained relatively resilient and inflation has remained in single digits for longer than expected,” She said.??There is no question that the Zambian economy has been stabilized in 2022, and there is positive market sentiment and more investor confidence in the country. The above analysis, however, just tells one part of the story about the performance of the economy. It is an incomplete story. There is need to assess the level of economic activities for the year compared to the previous year.

Gross Domestic Product (GDP) Growth and Job Creation in 2022

When one digs deeper, it is very apparent that Zambia’s economic activities slowed down in 2022 compared to 2021. And this was reflected in the complaints by the public about the lack of liquidity in the economy and the high cost of living. There is empirical evidence to support this narrative.??The first indicator that is worth looking at, as part of the diagnosis of the level of economic activity, is the Stanbic Purchasing Managers Index (PMI).This measures private sector purchasing activity, output and employment.
This metric deteriorated from 50.1 in 2021 to 49.1 in 2022; and any figure of this index which is below 50, indicates poor performance. It is clear that majority of businesses performed poorly in 2022 compared to 2021.Both output and new orders decreased due to money shortages in the economy, resulting in the reduction of employment.

The second indicator is the Bank of Zambia’s Quarterly Survey of Business Opinions and Expectations. In its Monetary Policy Statement of November,2022, BOZ said: “The November,2022 Bank of Zambia Quarterly Survey of Business Opinions and Expectations pointed to sluggish economic activity in the third quarter as most firms reported a decline in output, domestic sales, capacity utilization and level of investment on account of high borrowing costs.”??The third indicator is rather indirect. Government announced that K5.6 billion allocated to various ministries had still not been utilised. Speaking on behalf of Secretary to Treasury Felix Nkulukusa, Accountant General Kennedy Musonda said K5.6 billion was still sitting as unspent balances in the country’s treasury single accounts. There is no doubt that this huge sum of unspent funds had a bearing on economic activities, because Government expenditure is the catalyst that drives consumer spending. Consumer spending is important because private consumption constitutes about two thirds (2/3) of all economic activity in Zambia. The lack of liquidity in the economy can partly be explained by these unspent funds.??“We have squeezed money supply out of the economy to push for lower inflation and currency appreciation at the expense of the real economy. Every Zambian economic sector is operating below capacity with no end in sight”, Commented the highly respected and internationally exposed Economist, Trevor Maliwanda Simumba in his assessment of the Zambian economy.

It is clear from the above empirical evidence that economic activity declined in 2022, and the Finance Minister himself, Dr. Situmbeko Musokotwane, confirmed the same in his budget Speech: “the economy has continued to grow albeit at a slower rate. By the end of this year [2022], GDP is projected to grow by 3% compared to a recovery of 4.6% in 2021”.

One of the major effects of this reduction in economic activities is the shortage and loss of jobs in 2022 especially among the Youth. The Finance Minister, Dr. Situmbeko Musokotwane again admitted this during the 2023 post budget and national development symposium organised by the Chinese Chamber of Commerce in October, 2022.??”Our government feels that the biggest challenge that we have as a country or the biggest challenge that we have is how to create the jobs. Jobs, jobs, jobs. We are not yet doing enough to absorb the number of young people looking for jobs. We are not doing enough,” he told the Chinese Chamber of Commerce audience.

The Minister is well advised to look locally for critical mass job creation solutions. The answers to job creation are with us Zambians, especially in the private sector, and not from foreign advisors or investors. The government is looking in the wrong places for answers to jobs. Zambians know where the millions of latent jobs are hiding. Just consult us, and we will provide you with proven extraordinary innovative solutions to grow the economy by 10% – 12%, and not the projected 4% for 2023.

The way forward in 2023: What the New Dawn needs to do

On the basis of the diagnosis done above, there are a number of actions that need to be taken as solutions to the slow growth of the economy. The first immediate action should be to make changes at the Chief Executive Officers (Permanent Secretaries) level, in a number of Ministries based on last year’s performance evaluation available at Cabinet Office. They should be replaced with experienced Civil Servants who understand the system. The action should entail bringing back some old efficient and effective permanent Secretaries or civil servants, and/or promoting some within. The main reason for the underperformance in the civil service has been clearly identified by the President himself.
“One of the issues that is coming out now, is that, at a higher level, we are doing the right things, saying the right things, but the system is not responding. The system is clogging down things. I think we should address this matter. The narrative at the top must be the same as narrative in the middle and at the bottom,” President Hichilema told his audience of Government officials, as per Zambia National Broadcasting Corporation.

The Ministries are not performing largely because of a leadership crisis. We have Chief Executive Officers (CEOs) in Ministries, who do not understand on how the complex government bureaucracy works. They are not respected by their frustrated juniors, who understand the system better, and who are playing them, thus the inertia. This explains the poor performance, unexecuted programs and projects, thus unspent funds.
The second measure is to implement an economic stimulus programme. This should include the following: accelerated payment of suppliers, restarting suspended tenders, immediate implementation of shovel ready massive projects like the Lusaka – Ndola dual carriage way, Kasomeno Mwenda Bridge road to Lubumbashi, revising the additional bureaucratic procurement requirements introduced by the New Dawn, In general, re-activate the construction industry and award most contracts to local contractors with capacity, in order to avoid the export of jobs and forex, as was the case in the past.

The third proposed measure is to incentivise Zambian businesses especially Micro and Small businesses (MSEs).The Mines were given incentives. It is only fair that local businesses should be given too. These incentives could include: simplification of taxation to MSEs, streamlining regulations and consolidation of certain licences. In general, just reduce the cost of doing business. Businesses over regulated in Zambia. There is empirical evidence that suggests that over regulation facilitates corruption.

The fourth measure should be to address the market failure in the banking industry. The monetary policy rate has been 9% for over a year and inflation has been below 10%, but commercial banks have not dropped their lending rates like they do in other countries. Zambian commercial banks, who are mainly foreign owned, have been making huge profits from government borrowing and remitting them, without contributing to job creation by lending to local businesses at affordable rates. It is time that government intervened with some legislation by emulating Brazil who passed a Micro and Small enterprises law : Law 10735 (2003), which required compulsory allocation of 2% of demand deposit of commercial banks to provide credit to micro and small enterprises (MSEs).This measure created millions of jobs.


There is no question that the cost of living has increased in the past year, and that Zambians are hurting. It is also a fact that the cost of living could have been even much and much worse, if we had continued on the same trajectory that we were on in August, 2021. President Hichilema’s administration has reined in the rate of increase in the cost of living, stabilized the economy and improved Zambia’s image abroad.

On the other hand, as far as economic management is concerned, the single most important metric to measure any administration’s performance is the GDP growth rate. It is the GDP growth rate that generate taxation revenue and create jobs. The government needs to implement an aggressive economic stimulus package, even though the measures may lead to slightly higher inflation. There is a need to balance inflation targeting with job creation. People do not eat inflation.

Zambians should be cautiously optimistic about 2023, especially if government starts to listen to progressive Zambian thinkers’ advise who are outside the inner circle, and avoid “the Know it all attitude”, which was responsible for most of the avoidable 2022 blunders they made.

The writer is a Chartered Accountant and Author. He is a semi-retired international MSMEs Knowledge Consultant, and an independent financial commentator. He is also an Op-Ed Contributor to the Hong Kong based, Alibaba owned, and South China Morning Post (SCMP). Contact: [email protected]


  1. Sobering assessment………….

    The most important part is the part about a civil workforce in disarray, out of tune with the heads………

    This can not be all to do with CEOs none performance………..

    We have said this before………most of the Zambian civil service is lazy and corrupt.

    Most of them are business men and women, not professional civil servants, running side shops that take priority……..

    Coupled with 10 years of PF cader mentality where even the youth aspired to be caders…………

    We have a civil service that needs retraining……….

  2. Check one fact again and report accurately. The time PF handed over power to UPND the exchange rate was around K17 and not K24 to the US$. I wouldn’t attribute that performance to UPND, let alone write about it. That K24 was sometime in 2020. You may argue that the K17 exchange left by PF was manipulated, but the same can be true for UPND due to their limiting of money in circulation which you have correctly mentioned.

    • @2 I agree with the dollar was at K17 when UPND took over. The author of the article should improve his research otherwise he will be misleading the readers.

  3. Very helpful. Sober and unbiased assessment. I am often puzzled by the so called lack of jobs for the youth when there are tonnes of garbage lying uncollected in the cities. Zambians are building houses everywhere. There has never been such a boom in building construction in the country since independence. The problem is that there is a shortage of plumbers, electricians, brick layers etc with good qualifications. There is no university level education in these fields. Instead, our universities are cunning out thousands of social scientists and dishing out Masters’ degrees that have no relevance to the economy.

  4. @2 I agree with the dollar was at K17 when UPND took over. The author of the article should improve his research otherwise he will be misleading the readers.

  5. “The first immediate action should be to make changes at the Chief Executive Officers (Permanent Secretaries) level, in a number of Ministries based on last year’s performance evaluation available at Cabinet Office. They should be replaced with experienced Civil Servants who understand the system. ”
    This is very important and where RB got it right…with HH its just lipservice here yet he is handpicking cadres, activists, bootlickers etc and placing them in Ministeries as PS or Directors. Look at Thabo, no right thinking civil servant would get a govt loan to go and buy his wife a $60K vehicle….HH has not acted on this one.

    • “…Look at Thabo, no right thinking civil servant would get a govt loan to go and buy his wife a $60K vehicle….HH has not acted on this one….”

      Thabo can get any loan he wants……that is up to him , and president can’t stop him………

      He he choses to borrow himself to bankruptcy, that is up to him…….

      It is the flaunting of such extravagance that is the problem……

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