By Dr. Lubinda Haabazoka Five years ago, when President Hakainde Hichilema assumed office in August 2021, Zambia stood at one of the most difficult economic crossroads in its post-independence history. The country had become the first African nation to default on its sovereign debt during the COVID-19 pandemic. Public finances were under immense pressure, investor

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By Dr. Lubinda Haabazoka

Five years ago, when President Hakainde Hichilema assumed office in August 2021, Zambia stood at one of the most difficult economic crossroads in its post-independence history. The country had become the first African nation to default on its sovereign debt during the COVID-19 pandemic. Public finances were under immense pressure, investor confidence had deteriorated, inflation was eroding household incomes, the kwacha had significantly weakened, and foreign exchange reserves were dangerously low.

An objective assessment requires separating political rhetoric from economic reality.

What HH Inherited

When President Hichilema took office, he inherited an economy characterised by five major structural challenges.

1. Sovereign Debt Default

Perhaps the greatest challenge was Zambia’s debt crisis.

In November 2020, Zambia became the first African country to default on its Eurobond obligations during the COVID-19 era. The default effectively shut the country out of international capital markets, damaged investor confidence and constrained Government’s ability to finance development.

Public debt had risen to unsustainable levels while debt servicing crowded out expenditure on health, education and infrastructure. Debt restructuring therefore became the administration’s first economic priority.

2. Weak Investor Confidence

The debt default had consequences beyond Government finances.

Foreign investors became increasingly cautious. International credit ratings deteriorated, borrowing costs increased and private investment slowed. Without restoring credibility, attracting new investment into mining, manufacturing and infrastructure would have remained difficult.

3. High Inflation

Inflation remained elevated following the combined effects of COVID-19, exchange rate depreciation and supply disruptions. Higher inflation meant rising food prices, increasing transport costs and declining purchasing power for ordinary households. Economic stability could not be achieved without first bringing inflation under control.

4. Exchange Rate Pressures

The kwacha experienced prolonged depreciation prior to 2021. Currency instability raised the cost of imports, increased production costs for businesses and made debt servicing more expensive.

5. Fiscal Stress

Government finances were extremely constrained. Large debt obligations limited fiscal flexibility while significant arrears affected contractors and suppliers. The economy required both fiscal discipline and renewed confidence.

What Was Fixed

Debt Restructuring

The administration’s most significant economic achievement has been restoring Zambia’s relationship with international creditors.

Following lengthy negotiations, Zambia successfully restructured approximately US$13 billion in external debt, becoming one of the first countries to complete restructuring under the G20 Common Framework. This restored confidence among international investors and development partners.

Restoring Macroeconomic Stability

Economic management gradually shifted from crisis management towards stabilisation.

The IMF has acknowledged that Zambia significantly reduced macroeconomic imbalances, strengthened public finances, rebuilt foreign reserves and made considerable progress in fiscal consolidation while protecting priority social spending. One of the strongest indicators of restored confidence has been the accumulation of international reserves. Foreign exchange reserves have risen to approximately US$6.4 billion, providing stronger protection against external economic shocks.

Exchange Rate Recovery

One of the most visible improvements has been the recovery of the kwacha.

Although exchange rates naturally fluctuate, the currency strengthened considerably from previous lows, supported by improved investor confidence, stronger reserve accumulation and better macroeconomic fundamentals.

A stronger currency has helped reduce imported inflation while improving business confidence.

Declining Inflation

Inflation has steadily declined.

By 2026, annual inflation had returned to the Bank of Zambia’s target range, largely supported by exchange rate appreciation and moderating food prices..

Renewed Investment Confidence

Mining has become one of the largest beneficiaries of renewed investor confidence. Government policy has focused on expanding copper production, encouraging exploration, reopening previously distressed mines and attracting long-term investment.

Agriculture Recovery

The administration has also presided over a significant rebound in agriculture following improved rainfall and increased production. Record maize harvests have strengthened national food security while supporting rural incomes, although they have also created fiscal pressures through grain purchases.

Social Investment

Economic stabilisation was accompanied by substantial public investment in social sectors. Government expanded free education, increased Constituency Development Fund (CDF) allocations, recruited teachers and health workers and continued decentralisation reforms.

What Still Remains

Economic recovery should not be confused with economic completion.

Several major challenges remain.

Cost of Living

The most common concern among citizens remains the high cost of living.

Although inflation has declined, many prices remain significantly higher than they were several years ago.

Youth Unemployment

Perhaps Zambia’s greatest remaining challenge is employment.

Economic growth has improved. Investment has increased. However, employment creation has not yet matched the rapidly growing labour force.

Electricity Security

The recent drought exposed Zambia’s dependence on hydropower. Although investments in solar, transmission infrastructure and alternative energy sources have accelerated, energy security remains a critical policy priority.

Economic Diversification

Copper continues to dominate exports. Long-term resilience will require faster growth in manufacturing, agriculture, tourism, digital services and value addition.

The Overall Scorecard

From a purely macroeconomic perspective, Zambia today is unquestionably in a stronger position than it was in 2021. Debt restructuring has restored international credibility. Inflation has fallen significantly. Foreign reserves have strengthened.The exchange rate has stabilised considerably. Investor confidence has improved.

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