Zambia is on the cusp of a major economic milestone, with inflation projected to fall below 8% by the end of 2025—marking the first time in six years that the country’s inflation rate would align with the central bank’s target range of 6–8%. This signals a potential turning point for the southern African nation, which has endured years of financial turbulence.
From Crisis to Recovery
Zambia’s economic challenges escalated during the COVID-19 pandemic, culminating in a historic debt default in 2020—the first by an African country during the crisis. Inflation surged to nearly 25% by 2021, straining households and businesses across the country.
Further setbacks emerged in 2024, when Zambia was hit by the worst drought in over a century. This environmental disaster triggered severe power shortages and sent food and energy prices soaring. Inflation spiked again, reaching 16.8% as poor maize harvests and reduced hydropower generation crippled the economy. A depreciating local currency further worsened the cost of imports, compounding the inflationary strain.
A More Optimistic Forecast
Despite these challenges, Secretary to the Treasury Felix Nkulukusa offered a more hopeful outlook last Thursday. He announced that Zambia is now on track to bring inflation under control by the end of 2025. His projections are more optimistic than those of the Bank of Zambia’s February estimates, which anticipated inflation remaining in double digits into next year.
A faster-than-expected decline in inflation could offer much-needed relief to citizens and businesses alike. It could also strengthen Zambia’s economic outlook. Bloomberg reports that a return to the central bank’s target range would likely improve investor confidence, while Moody’s Investors Service has already raised its outlook on Zambia’s external debt, hinting at a potential upgrade to the country’s Caa2 credit rating.
Challenges Remain, But Optimism Grows
Encouragingly, this year’s rains have improved the agricultural outlook, offering hope for a better harvest. However, the power grid—which relies heavily on hydropower—continues to operate at reduced capacity. Intermittent power outages persist, and experts stress that long-term recovery depends on both agricultural performance and the rehabilitation of critical infrastructure.
Still, the government’s renewed optimism reflects a broader sentiment: after years of hardship, Zambia may finally be on the road to economic stabilization.
