Zambia’s Economy Set to Grow at Fastest Pace in 13 Years Amid Recovery from Historic Drought

Zambia’s economy is poised for its strongest growth in over a decade, with projections showing a 6.6% expansion in 2025, marking the fastest pace since 2012. The recovery follows a difficult period marked by the country’s worst drought in over a century, which severely affected agriculture and energy production. Finance Minister Situmbeko Musokotwane outlined these forecasts in his budget presentation on Friday, echoing estimates made by the International Monetary Fund (IMF).

“The 2025 budget is premised on economic recovery and promoting growth to improve the livelihoods of our people,” Musokotwane said during his speech.

This year, Zambia’s economy is expected to grow by just 2.3%, highlighting the sharp contrast with the robust growth anticipated for 2025. The dry weather conditions, driven by the El Niño phenomenon, devastated Zambia’s agricultural output and triggered an energy crisis by limiting hydropower generation, which resulted in prolonged power outages for businesses and households.

The drought hit Zambia at a particularly difficult time, as the government was in the final stages of completing a debt restructuring process that began in 2020, when Zambia became the first African nation to default on its debt during the COVID-19 pandemic. In response to the crisis, Musokotwane was forced to revise the 2024 budget, increasing allocations for drought relief efforts. These included social welfare programs and a cash-for-work initiative aimed at helping vulnerable populations cope with the economic fallout.

In June, the IMF boosted its financial support to Zambia by approximately $388 million, and the government has also requested further assistance from the World Bank. Zambia is expected to benefit from the La Niña weather phenomenon in 2025, which typically brings more favorable rainfall, potentially improving both agricultural yields and hydropower generation.

However, the combination of drought and economic difficulties has placed significant strain on public finances, just as the country has resumed servicing its restructured loans. The budget deficit is projected to widen to 6.4% of GDP in 2024, up from a previously estimated 4.8%. The government aims to reduce the deficit to 3.1% of GDP in 2025 as the economy stabilizes and grows.

With hopes pinned on a return to normal weather patterns and continued international financial support, Zambia’s economy is looking to emerge from the shadow of recent challenges and regain a path to sustainable growth.
Source:Bloomberg