While the Comesa market in Zambia’s capital of Lusaka seems to be bustling on the surface, merchants allege that business is suffering as a result of the country’s weak currency, which is pushing up costs.
“The dollar is killing us,” said Ben Mwandila, who used to sell 15 imported blankets a month for 50 kwacha ($2.75) each transaction but now only sells 2 or 3.
According to officials and analysts, Zambia’s inability to complete a debt restructuring after defaulting on payments in 2020, as well as low copper output, have led to a weak kwacha, keeping inflation from falling in recent months.
“Bondholders who had invested in our local markets and whose bonds or investments are maturing are getting the money out and not reinvesting,” said Natalie Mwila of the Zambian research tank Centre for Trade Policy and Development.
It is putting downward pressure on our currency, causing prices to rise across the board.
The value of the kwacha rose from more than 22 per dollar in July 2021 (before President Hakainde Hichilema took office) to as low as 15.4 kwacha per dollar in September 2022 as faith in the new leadership developed.
However, when the debt restructuring continued until March, the currency rate soared beyond 21 kwacha once again, albeit it has since firmed by 14%.
Inflation has been about 10% since June 2022, down from a peak of 24.6% in August 2021. Foreign investors held 24.7% of Zambia’s domestic government debt in the third quarter of 2022, down from 29% a year earlier, according to the most recent central bank figures.
Meanwhile, ordinary Zambians are having a difficult time. A minimal monthly food basket cost almost 9,000 kwacha in December, according to the Jesuit Centre for Theological Reflection, more than twice the national average monthly pay of 4,393 kwacha.
