1. From Crisis to Stabilization: Recovery After Default and Drought
Zambia is emerging from a turbulent period marked by its 2020 sovereign default and one of the worst droughts in Southern African history. The financial crisis was driven by unsustainable borrowing, opaque fiscal management, and sharp declines in commodity prices. Since taking office in 2021, President Hakainde Hichilema has overseen a turnaround built on political stability, fiscal consolidation, and IMF-supported policy reforms. Although the 2023–2024 El Niño–induced drought has severely hit agriculture and hydropower, early signs of meteorological recovery are offering cautious optimism.

2. Debt Restructuring Spurs Confidence and Fiscal Improvement
Zambia's debt restructuring under the G20 Common Framework reached a milestone in 2023 with an MoU covering $6.3 billion of bilateral obligations, followed by a successful Eurobond swap. In 2025, agreements with commercial creditors further eased external debt service pressure. Consequently, Zambia has been upgraded from "in debt distress" to "high risk of debt distress (sustainable)" by the IMF. Public debt, which peaked at over 150% of GDP due to currency depreciation and foreign-denominated liabilities, is projected to fall below 100% of GDP this year.

3. External Balances Rebound on Copper Exports and Investment Inflows
Copper—Zambia's economic backbone—accounts for nearly 60% of current account receipts. Despite energy-related constraints, copper output grew 12% in 2024, and rising foreign investor interest is expected to drive further gains. With exports mainly destined for Switzerland, China, UAE, and India, Zambia is insulated from direct US tariff exposure. Foreign reserves, which bottomed at $1.2 billion in 2020, have since recovered to over $4 billion in May 2025. The kwacha stabilized accordingly, gaining 13% against the US dollar in H1 2025.

4. Growth Accelerates Despite Adverse Climate Conditions
Zambia's GDP expanded by 4% in 2024, outperforming expectations despite severe agricultural losses. Growth is projected to exceed 6% in 2025–2026, led by mining, infrastructure investment, and gradual recovery in energy supply. Inflation, historically elevated due to food shortages and currency pressures, is expected to moderate to 11% by end-2025, with potential to drop further if the central bank maintains its tight policy stance (currently 14.5%).

5. Risks Persist, But Structural Tailwinds Are Strong
Zambia's medium-term outlook is anchored by robust current account performance, enhanced debt sustainability, and improving investor sentiment. Nonetheless, downside risks remain: slow hydropower recovery, copper price volatility, and fiscal slippage ahead of the 2026 elections. Structural vulnerabilities—including exposure to climate shocks and reliance on aid—add complexity. Still, with prudent policymaking and resilient fundamentals, Zambia appears poised for sustained economic recovery.