The Comesa market in Zambia’s capital Lusaka appears to be thriving, but vendors say business is suffering as a weak local currency drives up prices, compounding the miseries of a populace already battling with rising living costs.
“The dollar is killing us,” said Ben Mwandila, who used to sell 15 imported blankets per month for a profit of 50 kwacha ($2.75) per transaction but is now only selling 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.
The kwacha had risen from more than 22 per dollar in July 2021, just before president Hakainde Hichilema entered office, to as low as 15.4 kwacha per dollar in September 2022, supported by trust in the new leadership.
However, as the debt restructuring continued, the exchange rate rose back beyond 21 kwacha in March, albeit it has firmed about 14% so far this month.
Inflation has dropped from 24.6% in August 2021 to between 9% and 10% since June 2022. According to the most recent central bank data, foreign investors held 24.7% of Zambia’s domestic government debt in the third quarter of 2022, down from 29% a year earlier.
Ordinary Zambians, on the other hand, are struggling. According to the Jesuit Centre for Theological Reflection, which records food prices, a minimum monthly food basket cost nearly 9,000 kwacha in December, more than double the national average monthly wages of 4,393 kwacha.
The International Monetary Fund (IMF) praised Zambia’s economic reforms but still insisted that it would only hand the country $188 million from an agreed loan program if Zambia’s bilateral creditors agreed to debt relief.
Zambia is still negotiating a restructuring with both its bilateral creditors and private bondholders, but the talks have stalled due to a lack of agreement on how to deliver debt relief.
Several Western governments attribute the backlog to Zambia’s largest bilateral creditor, China, and IMF chief Kristalina Georgieva recently urged China to speed up work on restructuring agreements for countries such as Zambia, Ghana, and Ethiopia.
However, China, on the 14th of April, 2023, reiterated its commitment to restructure Zambia’s debt under the G20 framework.
