LUSAKA — Zambia’s newly re-elected President Edgar Lungu faces an uphill battle to revive an economy reeling from a slump in copper prices, with a free-falling currency and widening budget deficit.
After winning last week’s disputed vote, Lungu moved to assure supporters that a new government will work to improve the welfare of Zambians grappling with high inflation and rising food prices.
A drop in copper prices of almost one-third from their peak in February 2011 has resulted in thousands of job losses in the mining industry, where most companies are owned by foreign, notably Chinese investors.
The crisis saw some companies suspend production, dealing a further blow to the southern African country’s top export.
“The new government needs to work hard to restore economic growth,” said Oliver Saasa, the chief executive of business consultancy Premier Consult.
Saasa believes that Lungu, who first took office in January 2015 after the death of president Michael Sata, had been restricted by policies of his late predecessor.
“A government policy shake-up is needed in order to turn things around and inspire confidence in the system,” he told AFP.
“We cannot always rely on copper, the economy needs to diversify.” Zambia previously enjoyed a stellar period of growth, peaking at 10.3% in 2010.
But the falling copper price has put the economy “under intense pressure”, according to the International Monetary Fund (IMF).
In 2015 the country recorded gross domestic product (GDP) growth of 3.2% — its lowest since 1998 — and the rate is forecast to slip to around 3.0% this year.
The turbulent times saw the government in April mulling an emergency loan from the IMF, but no request has yet been finalised.
Although his poll victory is being challenged in court by his main rival, Hakainde Hichilema, the Patriotic Front leader has vowed to hit the ground running. “For the next five years, it will be total work, there will be no honeymoon,” Lungu told supporters at a rally shortly after his re-election last week.
The budget deficit is swelling — from 4.6% of GDP in 2015 it is projected to hover above 8.0% this year.
Adding to his woes is the state of the kwacha currency, which has weakened by 80% in two years against the US dollar, making it one of the worst performers in Africa in 2015 and pushing the inflation rate above 20%. Zambia’s economic problems are compounded by poor access to basic services, with electricity cuts still lasting up to four hours a day, compared to eight hours in June.
The crippling power shortages, which have hindered growth and investment, were triggered by an ongoing regional drought. Low water levels in Lake Kariba hobble the hydropower that supplies much of the country’s electricity.
For ordinary Zambians, life has become a daily struggle.
Households, even in the capital Lusaka, have turned to firewood and coal for cooking, filling the skyline with plumes of dark smoke. But for many, a lack of jobs and soaring food prices are their most serious concerns.
“The biggest worry I have now is the high cost of living,” said Morgan Zulu, who voted for Lungu in the election.
“Prices for almost everything in the country have gone up… the government to be formed should help reduce the cost of living.” According to the World Bank, 60% of the population lives below the poverty line.