Figure 1: Merchandise Trade Balance in Zambia (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Zambia have increased to USD 9.5 billion in 2018, from an annual average of USD 8.4 billion from 2015 to 2017[1]. Exports also increased to USD 9.1 billion in 2018, which is a considerable increase from the annual average of USD 7.3 billion from 2015 to 2017[2]. The strong growth in exports has improved Zambia’s merchandise trade balance to a deficit of -USD 400.6 million in 2018 from a deficit averaging -USD 1.1 billion from 2015 to 2017[3]. The growth in exports has not had a significant positive impact on gross official reserves due to weakening of the services trade balance and rising foreigners’ income from Zambia.
Figure 2: Gross Official Reserves in Zambia (2016-2024)
Source: IMF 2019, Zambia 2019 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Gross official foreign exchange reserves decreased to USD 1.6 billion in 2018 from an annual average of USD 2.5 billion from 2015 to 2017[4]. During this period, the ZMW depreciated by -9.0% in 2018 to ZMW 10.5 per USD (2017: 8.2%)[5]. Imports have grown in spite of the depreciation in the currency because the depreciation had slowed down after more significant depreciation in 2015 and 2016. The ZMW depreciated by an annual average of -22.5% in 2015 and 2016 from ZMW 6.2 per USD in 2014 to ZMW 10.3 per USD in 2016[6]. As a result, the balance of services trade deteriorated to a deficit of -USD 731.0 million in 2018 from a deficit averaging -USD 556.0 million[7]. Gross official reserves are projected to decrease to USD 1.3 billion in 2019, which is equivalent to 1.6 months’ import cover[8]. In the forward-looking medium-term from 2020 to 2024, gross official reserves are projected to decrease further to an annual average of USD 651.8 billion (approx. 0.8 months’ import cover)[9]. The strong export growth has had a short-term impact on Zambia’s current account balance but in the forward-looking medium-term the current account balance is projected to return to its persistent current account deficit.
Zambia’s current account balance deteriorated to a deficit of -USD 708.0 million in 2018, from a deficit averaging -USD 650.3 million from 2015 to 2017[10]. Apart from the growth in merchandise imports, which deteriorated the current account balance, the balance of services trade and net income has deteriorated which also deteriorated the current account balance. The current account balance is projected to deteriorate further to a deficit of -USD 851.0 million (approx. -3.6% of GDP) in 2019[11]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to improve to annual average deficit of -USD 628.6 million (approx. -2.7% of GDP)[12].
Figure 3: Current Account Balance in Zambia (2016-2024)
Source: IMF 2019, Zambia 2019 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
However, Zambia is still heavily dependent on copper trade which means export earnings are vulnerable and have been affected by commodity price volatility and the general decline in commodity prices since 2014. For example, copper prices declined by an annual average of -12.6% from USD 6863.4 per MT in 2014 to USD 4867.9 per MT in 2016, before recovering to USD 6169.9 per MT in 2017[13]. Copper contributed 69.9% of Zambia’s total export earnings in 2018 which has increased from the average of 67.2% from 2015 to 2017 (2014: 67.1% of exports)[14]. In spite of this concentration of exports, Zambia is highly integrated in terms of regional trade with neighbouring countries in COMESA and SADC.
The top-five exports from Zambia to COMESA are inorganic chemicals, cement and lime stone, sugarcane products, copper and non-alcoholic beverages which constituted 6.8% of total exports in 2018 (2015-‘17: 5.3% of total exports)[15]. The value of the top-five exports from Zambia to COMESA increased to USD 613.3 million in 2018 from an annual average of USD 389.6 million from 2015 to 2017[16].
The value of total exports from Zambia to COMESA decreased to USD 1.6 billion (approx. 17.6% of total exports) in 2018 from an average of USD 1.2 billion (approx. 17.1% of total exports)[17]. These are relatively high or above-average levels of intra-regional trade given that the COMESA average intra-regional exports level was 11.9% of total exports in 2018. The COMESA intra-regional exports, meaning total exports amongst COMESA countries, as a share of total exports to the world increased from an average of 10.5% from 2015 to 2017[18]. Given Zambia’s balance of merchandise trade in the region, there is room to increase its exports to COMESA countries.
Figure 4: Nominal Exchange Rate in Zambia (2015-2018)
Source: BoZ 2019, Historical Series of Exchange Rates Between ZMK/ZMW Against Other Currencies.
Zambia’s top-five imports from COMESA are copper, metallic ores, metallic salts, petroleum and pharmaceuticals. These imports are diversified and they constituted 20.7% of total imports to Zambia in 2018 (2015-‘17: 12.0% of total imports)[19]. The value of the top-five imports from COMESA to Zambia increased to USD 2.0 billion in 2018 from an annual average of USD 1.0 billion from 2015 to 2017[20].
The value of Zambia’s total imports from COMESA increased to USD 2.1 billion (approx. 22.7% of total imports) in 2018 from an annual average of USD 1.6 billion (approx. 19.1% of total exports) from 2015 to 2017[21]. These are very high levels of intra-regional trade given that the COMESA average intra-regional imports level was 6.5% of total imports in 2018[22]. The COMESA intra-regional imports, meaning total imports amongst COMESA countries, as a share of total imports from the world increased only from an average of 5.5% from 2015 to 2017[23].
Table 1: COMESA Regional Trade for Zambia (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Zambia maintains a persistent and growing merchandise trade deficit in COMESA which increased to a deficit of -USD 556.1 million in 2018 (2015-’17: -USD 359.2 million). Hence, there is room to increase Zambia’s exports to COMESA countries. This would make Zambia’s intra-regional trade balance in COMESA more equitable.
The top exports from Zambia to the SADC are copper, inorganic chemicals, cement and limeston, animal feed and gold, which constituted 13.9% of total exports in 2018 (2015-‘17: 7.4% of total exports)[24]. The value of the top-five exports from Zambia to SADC increased to USD 1.3 billion in 2018 from an annual average of USD 537.2 million from 2015 to 2017[25].
The value of total exports from Zambia to the SADC increased to USD 2.6 billion (approx. 28.4% of total exports) in 2018 from an average of USD 1.7 billion (approx. 23.2% of total exports)[26]. These are very high levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[27]. Given Zambia’s balance of merchandise trade in the region, there is room to increase its exports to SADC countries.
Table 2: SADC Regional Trade for Zambia (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Zambia’s top-five imports from SADC are copper ores, petroleum metallic ores, fertilisers and metallic salts. These imports are diversified and they constituted 26.1% of total imports to Zambia in 2018 (2015-‘17: 16.4% of total imports)[28]. The value of the top-five imports from SADC to Zambia increased to USD 2.5 billion in 2018 from an annual average of USD 1.4 billion from 2015 to 2017[29].
The value of Zambia’s total imports from SADC increased to USD 5.3 billion (approx. 56.5% of total imports) in 2018 from an annual average of USD 4.8 billion (approx. 57.1% of total exports) from 2015 to 2017[30]. These are very high levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[31]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[32].
Zambia maintains a persistent merchandise trade deficit in SADC which decreased to a deficit of -USD 2.8 billion in 2018 (2015-’17: -USD 3.1 billion). Zambia is quite reliant on the SADC for its imports and there is significant room to increase its exports to SADC countries. This would make Zambia’s intra-regional trade balance in SADC more equitable.
In addition, Zambia might want to reassess the balance of benefits to its COMESA and SADC membership given that it received greater benefit from COMESA on the account of its relatively more favourable merchandise trade balance. Therefore, there is room to rebalance the Zambia’s imports towards COMESA and increase Zambia’s exports to both regions. This would also make Zambia’s intra-regional trade balance with COMESA and SADC more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2019a. Zambia 2019 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019]; IMF 2017. Zambia 2017 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019].
[5] BoZ 2019. Historical Series of Exchange Rates Between ZMK/ZMW Against Other Currencies, Bank of Zambia: Lusaka. Available At: https://www.rbm.mw/ [Last Accessed: 15 October 2019].
[6] BoZ 2019. Historical Series of Exchange Rates Between ZMK/ZMW Against Other Currencies, ibid.
[7] IMF 2019a. Zambia 2019 Article IV Report, ibid.; IMF 2017. Zambia 2017 Article IV Report, ibid.
[8] IMF 2019a. Zambia 2019 Article IV Report, ibid.
[9] IMF 2019a. Zambia 2019 Article IV Report, ibid.
[10] IMF 2019a. Zambia 2019 Article IV Report, ibid.; IMF 2017. Zambia 2017 Article IV Report, ibid.
[11] IMF 2019a. Zambia 2019 Article IV Report, ibid.
[12] IMF 2019a. Zambia 2019 Article IV Report, ibid.
[13] IMF 2019b. IMF Primary Commodity Prices, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 4 October 2019].
[14] UNCTAD 2019. UNCTADStat Database, ibid.
[15] UNCTAD 2019. UNCTADStat Database, ibid.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
[28] UNCTAD 2019. UNCTADStat Database, ibid.
[29] UNCTAD 2019. UNCTADStat Database, ibid.
[30] UNCTAD 2019. UNCTADStat Database, ibid.
[31] UNCTAD 2019. UNCTADStat Database, ibid.
[32] UNCTAD 2019. UNCTADStat Database, ibid.
