Although it seems like business is booming at the Comesa market in Zambia’s capital Lusaka, sellers claim that the poor local currency is hurting their industry and making things worse for a populace already struggling with increased living expenses.
“The dollar is killing us,” said Ben Mwandila, who used to sell 15 imported blankets a month at a profit of 50 kwacha ($2.75) per sale but is now only doing two or three.
“Bondholders who had invested in our local markets and whose bonds or whose investments are maturing are getting the money out and are not reinvesting,” said Natalie Mwila of the Centre for Trade Policy and Development, a Zambian think-tank. “It’s putting pressure on our local currency, which obviously also has raised the cost of living,” he added.
As a result of people’s confidence in the new government, the kwacha appreciated from more than 22 per dollar in July 2021, shortly before president Hakainde Hichilema took office, to as little as 15.4 per dollar in September 2022.
Although it has firmed by nearly 14% so far this month, the currency rate returned to exceeding 21 kwacha in March as the debt restructuring proceeded.
Since June 2022, inflation has decreased from a high of 24.6% in August 2021 to a low of 9–10%. In the third quarter of 2022, foreign investors held 24.7% of Zambia’s domestic government debt, down from 29% a year earlier, according to the most recent data from the central bank.
On the other side, the majority of Zambians are struggling. A minimal monthly food basket in December cost roughly 9,000 kwacha, which is more than double the average monthly pay in the country of 4,393 kwacha, according to the Jesuit Centre for Theological Reflection, which keeps track of food prices.
While applauding Zambia’s economic reforms, the International Monetary Fund (IMF) emphasized that it would only provide the nation with $188 million from a pre-approved loan program if Zambia’s bilateral creditors agreed to debt relief.
Zambia is still in the process of discussing a restructuring with both its bilateral creditors and its private bondholders, but the discussions have come to a standstill because there is no consensus on how to provide debt relief.
China, Zambia’s biggest bilateral creditor, is blamed by some Western governments for the backlog, and IMF chief Kristalina Georgieva has asked China to expedite work on restructuring deals for nations including Zambia, Ghana, and Ethiopia.
On April 14, 2023, China, however, reaffirmed its willingness to restructure Zambia’s debt within the G20 framework.
