Zambia targets growth rebound after worst drought in living memory

By Chris Mfula

LUSAKA (Reuters) – Zambia is aiming for a sharp rebound in economic growth and a halving of its budget deficit next year as it recovers from the worst drought in living memory, its finance minister said on Friday.

The copper producer is targeting growth of 6.6% in 2025 compared to a forecast for 2.3% growth in 2024, Finance Minister Situmbeko Musokotwane said in a budget speech.

The El Nino-induced drought has wiped out crops across southern Africa, causing food shortages and denting the region’s economic prospects this year.

Musokotwane said next year’s rebound was premised on a better performance of mining and agriculture.

Zambia is targeting a budget deficit of 3.1% of gross domestic product in 2025, compared to the 6.4% forecast in 2024.

Roughly 80% of next year’s spending will be financed by domestic revenues, with 4% financed by grants and 16% by borrowing.

The minister also said Zambia was still negotiating restructuring terms with some commercial creditors, after wrapping up a Eurobond restructuring exercise.

He said Zambia had recently reached provisional restructuring agreements with Industrial and Commercial Bank of China and China Development Bank.

The agreements have been shown to be compatible with Zambia’s International Monetary Fund programme and the “Comparability of Treatment principle” aimed at ensuring the Paris Club of wealthy creditor nations does not give outsized concessions compared to other creditors.

Zambia’s protracted debt rework has deterred investment and weighed on local financial markets.