Zambia faces uncertain times
The Zambian economy has been expanding at a rapid pace in recent years, but is facing uncertain times in 2015. Global copper prices fell sharply in December and January, and in March were trading around 20% below the levels achieved a year earlier. Copper exports are by far the single largest contributor to export earnings in Zambia (typically accounting for around 70% of total merchandise exports) and the fall in copper prices is undermining export revenues, eroding foreign exchange reserves, increasing the current account and fiscal deficits, and putting pressure on the local currency (the kwacha was trading at a record low of around ZMK7.25:US$1 in mid-March). In addition to this economic turbulence, the mining sector has been unsettled by the government’s new tax regime that seeks to raise revenue from international mining companies, while the political situation is highly uncertain. Long-standing president Michael Sata died in October 2014 and a snap presidential election in January resulted in Edgar Lungu taking over as the head of state until the next scheduled election in 2016. Unsurprisingly, there is severe political in-fighting and division within the ranks of the ruling Patriotic Front. A situation that is being exacerbated by Mr Lung’s own health problems.