Zambia’s exports have had a slower growth since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports had a slower growth since the recovery to USD 11.1 billion in 2021. Zambia has a highly concentrated export profile and earnings from copper have continued increasing to USD 7.7 billion (approx. 69.3% of total exports) in 2021. Other top exports from Zambia include gold and lime and cement. These exports contributed USD 721.8 million (approx. 10.0% of total exports). Zambia’s export earnings from gold have continued increasing to USD 402.9 million in 2021; and earnings from lime and cement have continued increasing to USD 318.8 million in the same period. Zambia’s trade surplus continued widening from the historical medium-term average of USD 641.5 million for 2018 to 2020, to USD 3.2 billion in 2021.
Total merchandise export earnings have continued increasing which relieved the pressure caused by net FDI outflows (foreign capital being extracted from domestic market). Zambia’s FDI outflows increased to USD 456.7 million in 2021. Hence, Zambia’s FDI stock has had a seemingly delayed impact of COVID-19 and begun decreasing from an annual average of USD 19.6 billion for 2018 to 2020, to USD 18.9 billion in 2021. This does not bode well for Zambia as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on copper exports. This could also signify the contagion of the fiscal and public debt crisis on the rest of the Zambian economy, which signifies less progress for the national economic development and diversification strategy.
Remittances receipts have grown over the period. Personal remittances received have been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 113.4 million for 2018 to 2020, to USD 241.7 million in 2021. Personal remittance payments to foreign nationals have begun increasing since the COVID-19 pandemic despite being below the historical medium-term average of USD 108.1 million for 2018 to 2020, to USD 106.8 million in 2021. Zambia has had net remittance inflows (net remittance receipts from the diaspora) which increased to USD 134.9 million in 2021. This has affected the current account balance and strength of the ZMW over the period.
The ZMW has continued depreciating. In nominal terms, the ZMW depreciated by an annual average of -27.8% against the USD for 2018 to 2020. The ZMW depreciated by -52.5% to an annual average of ZMW 20.0 per USD in 2021. Zambia’s current account surplus narrowed despite being above the historical medium-term average. In 2022, Zambia’s current account balance deteriorated to a deficit. In particular, Zambia has benefited from the higher copper prices which started depreciating despite the lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. Global prices for copper depreciated by -2.4% to USD 9,097.2 per MT in 2022 (2021: 50.9%; USD 9,317.4 per MT). However, this has been offset by continued higher fuel and food import prices. This is also reflected in the projections for Zambia’s current account balance.
In 2023, Zambia’s current account deficit is projected to continue widening to -USD 1.1 billion (approx. -3.7% of GDP). In the medium-term from 2024 to 2026, Zambia’s current account balance is projected to recover to a surplus averaging USD 131.0 million (approx. 0.3% of GDP). This illustrates a persistent improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia and the global transition from fossil fuels in the case of copper. Copper prices are expected to remain relatively elevated in 2023. This seems unlikely to change in the medium-term due to the global commitments towards net zero by automotive producers who pledged to discontinue production of internal combustion engines by 2030 and 2050 onwards. Therefore, Zambian authorities will have to take advantage of the commodity price boom and invest in further development of the economy and diversification of the country’s exports away from the continued reliance on copper.
The issue of developing and diversifying the Zambian economy remains an elusive obstacle for the country. Zambia still has a significant potential to grow its exports from gold and lime and cement. These represent the highest growth potential towards diversifying the Zambia’s economy and export earnings. Apart from this, Zambia should also deepen its integration in the COMESA and SADC region and increase its intra-regional trade. This will provide an opportunity for Zambia’s exports to compete against goods and services of comparable quality from the local regions. Moreover, Zambia can offset the risks with its traditional export markets by increasing its dependence on the local regions for its exports.