Research trip to Zambia

A member of the Emerging Markets Fixed Income team visited Zambia in September 2024 to participate in several meetings with policymakers, financial institutions, and private and public sector partners. Zambia is a resource-rich country with a young population and a well-functioning democracy that is able to adapt to changing times. The country is currently facing several crises but the longer-term outlook remains positive.

Zambia has been experiencing extreme weather conditions since late 2023, when the El Niño climate phenomenon caused a serious drought that led the country to declare a national state of emergency. Long periods without rain severely limit power generation in Zambia, which relies heavily on hydropower. During the team's visit, electricity was available for only two to four hours per day.

While the country experienced annual GDP growth of around 5% in the wake of the Covid-19 pandemic, economic growth expectations were lowered to 1.7% for 2024 as the disruption to the electricity supply is placing constraints on almost all business activities in the country. Inflationary pressures have persisted as the local currency, the Zambian kwacha, depreciated significantly in 2023 and imported inflation is continuing to push up prices.

In the longer term, Zambia has strong potential for positive and inclusive growth. Despite the present crises, local sentiment remains optimistic. On the one hand, the current government has been effective in reforming the country. On the other hand, foreign direct investment has increased.

Zambia's vast mineral wealth continues to attract investment in the extractive sector. The electrification of societies is a global megatrend that is expected to drive demand for key industrial metals for years to come. As Zambia is a major producer of copper and some other key metals that are important for the electrification trend, investment flows are expected to further strengthen. Many projects related to copper mining are currently underway.