Zambia’s Kwacha Hits Record Low Amid Power Crisis
TLDR
- Zambia’s currency, the kwacha, weakened for an 11th consecutive day, trading at 28.1200 per dollar on Tuesday
- The decline reflects the mounting economic pressure caused by a severe drought that has slashed hydropower generation at the Kariba Dam
- Water levels at the dam are at 2.6% of usable storage, forcing Africa’s second-largest copper producer to rely on costly electricity imports
Zambia’s currency, the kwacha, weakened for an 11th consecutive day, trading at 28.1200 per dollar on Tuesday, its lowest level on record. The decline reflects the mounting economic pressure caused by a severe drought that has slashed hydropower generation at the Kariba Dam, the country’s main electricity source.
Water levels at the dam are at 2.6% of usable storage, forcing Africa’s second-largest copper producer to rely on costly electricity imports. Prolonged power cuts impact households, businesses, and mining companies, further straining the economy.
Ongoing challenges cloud Zambia’s economic outlook. A disappointing rainy season, predicted by meteorological forecasts, could exacerbate the country’s reliance on electricity imports and imported fuel, raising inflationary pressures. Oxford Economics Africa forecasts below-consensus GDP growth of 3.4% in 2025, citing weak hydropower recovery and rising costs.
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Key Takeaways
The kwacha’s 8% decline against the dollar over the past year mirrors struggles faced by other African currencies. Additionally, upstream water flows in the Zambezi River are significantly lower than last year, further dampening recovery hopes. Global trade dynamics, including potential impacts from US President-elect Donald Trump’s tariffs on China, Zambia’s key trading partner, add further uncertainty to the nation’s economic trajectory. Policymakers may face tough decisions, including monetary tightening, to stabilize the currency and mitigate inflation risks.
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