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Economic diplomacy

Economic Profile

After decades of systematic stagnation and economic decline, Zambia experienced a phase of economic growth from 2000 to 2018. In 2019, however, this growth slowed down for the following reasons: the poor rainy season and the resulting drought and the serious energy crisis which strongly penalized the production sectors in particular (mining, industrial and agricultural), as well as the strong devaluation of the currency local (over 10%) and strong inflation (9%).The economic expansion continues to be supported by the copper mining sector which, thanks to high international prices, continues to have stimulating effects on other sectors of the economy and which still represents 70% of Zambia’s exports. In particular, positive effects have been had on construction, which is the protagonist of a significant growth induced by the increase in demand for residential homes and by the civil works of modernization and infrastructure provision underway in the country (mainly roads and airports). However, the ambitious program in the infrastructure sector has led the country to excessive debt, an element that causes considerable concern at an international level.
Debt sustainability is an objective pursued by the Government which has reactivated dialogue with the IMF in this regard. Furthermore, in less than two years, Zambia will have to start repaying the three Eurobonds signed by the government: the first of 750 million dollars (issued in September 2012) will mature in 2022, the second of 1 billion dollars (April 2014) in 2024 and the last of 1.25 billion dollars (July 2015) will have to be repaid in installments between 2025 and 2027 (overall it is 3 billion dollars by 2027). According to the 2020 budget presented to Parliament by the Minister of Finance, the intention to set aside funds for the first time, equal to approximately 47.7 million USD, for the progressive repayment of Eurobonds was accepted.

According to official sources, GDP growth expected for the next five years should be around 2.5% per year; in 2019 growth is expected to settle at 2%. A rise is expected starting next year in anticipation of the high price of copper on international markets and an expected normalization of the energy crisis. The inflation rate is expected to fluctuate between 6 and 8% over the same period, although it is averaging 9% in 2019. Zambia’s 2018 GDP is approximately USD 26.7 billion. The Zambian Kwacha depreciated by 9.4% against the US dollar. While the external debt at the end of June 2019 amounted to USD 10.23 billion.

The intent declared in the 2020 budget concerns the stimulation of the home economy in order to reduce the deficit. The macroeconomic targets for 2020 concern the achievement of real GDP growth of at least 3%; maintain the inflation rate between 6 and 8%; reduce the fiscal deficit by 5.5% of GDP and finally, increase domestic revenue mobilization by at least 22% of GDP.

However, all forecasts will need to be revised in light of the inevitable impact of the COVID-19 crisis at a global level.

The Zambian Government attaches particular importance to development led by the private sector and foreign investments as part of a strategy aimed at economic diversification, i.e. at reducing dependence on the copper sector, trusting in the fact that diversification and job creation can be achieved through public and private investments (PPP) in the agricultural, tourism, energy, manufacturing and mining sectors.

Italian companies in Zambia

The Italian companies currently operating in Zambia are Enel Green Power, which has built a photovoltaic plant (34MW) under concession outside Lusaka as part of the “Scaling Solar” project financed by the World Bank; Building Energy which won 2 lots of the GetFit program, financed by KfW, for the concession construction of a photovoltaic system of approximately 40 MW near the city of Kabwe; the consultancy firms SARI, Team Engineering and Technital. Family-run businesses created and managed by fellow countrymen residing here are very active.

Institute for Foreign Trade (ICE)
The ICE Office responsible for Zambia, Malawi and Botswana is that of Johannesburg, South Africa.
ICE Johannesburg Office (RSA)
42 Chester Road, Parkwood,
2193 P.O. Box 1261 Parklands 2121
Tel.: +27.011.880.8383
Fax: +27.011.880.9040/1
E-mail: johannesburg@ice.it
Website https://www.ice.it/en/markets/south-africa/johannesburg

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Economic Observatory on Foreign Trade – Zambia Country Fact Sheet

 

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