By Yohane Mbeeya Moono

History

Zambian government under the Patriotic Front had a accrued unsurmountable amount of deal in order to improve the infrastructure of the country. However, the Eurobonds were not invested into income generating avenues and when it was concluded that the country needed Debt Relief, the Patriotic Front led government initiated the Debt Restructuring Programme. The programme demanded that the government should greater commitment to fiscal discipline.
In November of 2019, then President His Excellency Edgar Chagwa Lungu launched and Economic Recovery Plan which centred on Zambia securing an International Monetary Fund Bailout Package and restructuring Zambia’s insurmountable debt mountain that had left the economy is distress.
In August 2021, Zambia experienced a change of government and the New Dawn Administration under the United Party for National Development committed to ensuring that the Debt Restructuring Programme is attained. The Zambian government committed to being under an International Monetary Fund Bailout Package programme. This meant that the country’s commitment to improve fiscal discipline and social services would closely supervised by the International Monetary Fund. Though the initiatives are to be home grown by the government.
In June of 2022, the International Monetary Fund agreed on the Bailout Package because the Zambian government had attained the desired conditions for the Bailout Package. However, the critical issue remained at convincing the Zambian creditors to give Zambia some much needed debt relief in order for the country to commit substantial amounts into the resuscitating of the struggling economy.
It is worthy noting that Zambia because the first country in the pandemic era to default on debt payments. The country’s economy being in distress meant that the country could not afford to pay the debt. The Zambian government as of 2020 was spending about 56% of its revenue on debt repayment.

Why Debt Restructuring

The Zambian government is cognizant that she needs to pay her debt to the creditors but needs more time to transform her economic fortunes and be able to pay the debt. Therefore, the Zambian government committed to the Creditors to extend the payment period and reduced payment rates for the said debts.
The debt in question is mostly owed to commercial lenders who do not want to lose their investments but were open to having the debt paid over a longer period of time. Zambia had to give assurances to the lenders that their monies would be paid but not at a time when the economy was in distress. Hence the plea to have the debt payment suspended for three years and resume paying in 2026 when the country’s economy would have improved.
On June, 2023, the International Monetary Fund Chief Executive Officer announced that Zambia had reached the milestone agreement with the official creditors committee on the Debt Restructuring. The Creditors Committee was co-chaired by France and China with South Africa doubling the Vice Chair.
The Zambian President had been globe trotting to ensure that the Debt Restructuring Deal is clinched. The announcement of the deal being sealed and signed represents greater milestone for the aspirations of Zambia to transform her economic fortunes. Apart from globe trotting, the Zambian President has been engaging the different Presidents in order to have the deal reached.

What does It Mean for The Zambian Economy

The Zambian government had announced that once the deal of debt restructuring is clinched, this would allow the country to channel more money into the economy more especially income generating avenues in order to create more jobs for the Zambian population which sometimes cannot be patience. Additionally, more money would be channelled towards the improvement of the Education and Health sectors as well as the Agriculture sector.
The Zambian government through the Industrial Development Corporation needs to step up the establishment of industries like the Kalene Hills Fruit Company and the Katete Fruit Company as well as the Munushi Banana Plantation. The government now needs to attract more investments because the much needed investors should be restored with the deal being clinched. The country now needs all economically driven sectors to start functioning properly. The deal should act as the stimulus to spur the country to greater economic development.

Zambia needs to aggressively champion the transformation of the economy in order to be able to be ready to repayment the debt. Zambia has been given debt relief for 20 years and a grace period of 3 years meaning that in the next three years the country shall not worry about debt repayment but development and growth of the economy in order to be ready to pay the debt beginning 2026.

Time has come for the country to improve the economic fortunes

By Alexander Vomo

Introduction:

During the period when Zambia’s economy was booming and the exchange rate was strong, the Zambian Kwacha was indeed on par with the British pound. This means that 1 Zambian Kwacha was equal to 1 British pound. The exchange rate of 1:1 between the Zambian Kwacha and the British pound symbolized the strength of Zambia’s economy at that time. This article aims to explore the factors that contributed to this phenomenon, with a particular focus on the significant role played by copper production.

1. Historical Context:

In the 1960s and 1970s, Zambia witnessed an economic boom, primarily driven by its thriving copper industry. The country gained independence from British colonial rule in 1964, and soon after, Zambia’s economy flourished, leading to a strong exchange rate against major currencies, including the British pound.

2. Copper Production and Economic Contribution:

Copper, often referred to as Zambia’s “red gold,” played a pivotal role in driving the country’s economic success. Zambia emerged as one of the world’s leading copper producers, with vast reserves and substantial mining operations. Copper production contributed significantly to government revenue, export earnings, and job creation, stimulating economic growth across various sectors.

3. Global Demand and Copper Prices:

During this period, global demand for copper was high, particularly from industrialized nations. The increasing demand for copper, driven by infrastructure development, manufacturing, and technological advancements, resulted in higher copper prices. Zambia, as a major producer, benefited from these favorable market conditions, further bolstering its economic position.

4. Foreign Exchange Reserves and Confidence:

The strong copper industry and rising export earnings led to an accumulation of foreign exchange reserves for Zambia. Increased reserves instilled confidence in the country’s economic stability and financial system. This confidence attracted foreign investments, boosted international trade, and contributed to the strong exchange rate, including parity with the British pound.

5. Government Policies and Stability:

The Zambian government’s policies and stable governance during this period also played a crucial role in the economic boom. The government implemented favorable economic measures, including investment incentives, infrastructure development, and prudent fiscal policies. This stability and conducive business environment attracted foreign investors and facilitated sustainable economic growth.

6. Diversification Challenges:

While copper production was instrumental in Zambia’s economic boom, it also highlighted the country’s overreliance on a single commodity. The economy’s heavy dependence on copper exposed Zambia to vulnerability during times of fluctuating copper prices or global market downturns. This underscored the need for diversification and the development of other sectors to ensure sustained economic growth.

Conclusion:

During a period of Zambia’s history, the country experienced an economic boom, leading to a strong exchange rate on par with the British pound. The significant contribution of copper production, driven by global demand and favorable copper prices, played a crucial role in this phenomenon. The accumulation of foreign exchange reserves, government stability, and favorable policies further bolstered the economic success. However, the boom also highlighted the need for diversification to mitigate risks associated with overdependence on a single commodity. Zambia’s economic history serves as a reminder of the potential that can be harnessed through strategic resource management, stable governance, and efforts towards a diversified and resilient economy.