Zambia Economics

Zambia Economics


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

In Zambia, the lingering problems of the national economy and the irresponsible fiscal policy of the past years have fully manifested themselves after the outbreak of the COVID-19 pandemic. The country has been going into debt at an unsustainable rate since 2012. Most of the loans were used for infrastructure projects, implemented and financed, often under very opaque conditions, by Chinese entities. Zambia experienced its first economic contraction in many years in 2020. It was significantly affected by the drop in world copper prices and tourism, whose share in the country’s GDP has grown rapidly in recent years and in 2019 already amounted to approximately 7%. The combination of the unfavorable economic situation in Zambia and turbulent developments on international financial markets led to a significant depreciation of the Zambian kwacha, which weakened by approximately 50% against the US dollar in 2020. This created an acute problem, in terms of repaying Zambia’s foreign financial obligations, and further increased the rate of inflation, which during 2021 in a year-on-year comparison reached values โ€‹โ€‹of around 23% (at the same time, the inflation target of the central bank is in the range of 6-8%). In November 2020, Zambia stopped paying its due debts and thus technically found itself insolvent. It is negotiating with international creditors to restructure the debt and is seeking a bridging loan from the IMF. In December 2021, the IMF announced that an agreement had been reached with the Government of Zambia (Staff Level Agreement) to be supported by a loan of SDR 980 million (US$billion) under the Extended Credit Facility in 2022-2025. Credit however, it still has to be approved by the IMF’s Executive Board and the prerequisite is progress in debt restructuring negotiations with other creditors (the IMF cannot lend to countries whose debt burden is considered unsustainable). For 2021, Zambia has returned to moderate economic growth of 1.6%. The inflation rate has been on a downward trend after peaking in mid-2021 and fell to 13.1% year-on-year in March 2022.

According to, Zambia’s national economy is poorly diversified and depends largely on agriculture and mining of minerals, especially copper. Copper exports account for more than 70% of total export earnings. Zambia therefore faces a high dependence on climatic conditions and the prices of mined commodities on world markets. Other limiting factors for economic development are insufficient infrastructure and lack of skilled labor. Zambia has very favorable conditions for agriculture, but the problem is its low diversification (the cultivation of a few basic crops dominates, especially maize), insufficient mechanization and, to a large extent, chemicalization. Most of the agricultural land is dependent on rainfall, only a minimum is artificially irrigated. The number of large commercial farms is increasing, but the vast majority of farmers are small farmers, producing mainly for own use. Since 2006, Zambia has had a long-term poverty alleviation strategy called Vision 2030, developed into a series of five-year national development plans. The main development priorities are the modernization and diversification of agriculture, the mining industry and tourism, the improvement of electricity and water supply, the construction of transport infrastructure and the development of information and communication technologies.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 1,4 -2,3 1,6 3,1 3,6
HDP/obyv. (USD/PPP) 3 857,00 3 690,00 3 770,00 3 880,00 4 010,0
Inflation (%) 9,2 15,7 22,3 18,5 13,4
Unemployment (%) 12,5 12,9 N/A N/A N/A
Export of goods (billion USD) 7,3 7,6 10,4 11,3 12,7
Import of goods (billion USD) 6,5 5,2 5,3 5,5 5,8
Trade Balance (Billion USD) 0,7 3,2 4,6 5,4 6
Industrial production (% change) -2,5 -3,2 2,8 6,9 6
Populace (mil.) 17,9 18,4 18,9 19,5 20
Competitiveness N/A N/A N/A N/A N/A
OECD export risk 7/7 7/7 7/7 N/A N/A

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -10,6
Public debt (% of GDP) 100
Current account balance (billion USD) 2,7
Taxes 2022
AFTER 30 %
FO 37,5 %
DPH 16 %

In recent years, Zambia has regularly run a significant and growing budget deficit, which already exceeded 11% of GDP in 2020. The estimate for 2021 also speaks of a value exceeding 10% of GDP. The populist fiscal policy of the previous government manifested itself, culminating before the elections in August 2021. However, even the approved budget for 2022 does not show significant signs of fiscal consolidation and expects a deficit of 6.7% of GDP. Among other things, the government is introducing tax breaks for legal entities and individuals (reduction of corporate tax from 35% to 30% for most companies, reduction of the tax base for mining companies, increase of the limit of the zero rate of tax on the income of natural persons), removed duties on the import of a number of agricultural equipment and to export corn, abolished tuition fees in secondary schools under the motto of free education for all and intends to employ 30 thousand teachers and 11, 2 thousand additional health workers. The volume of the budget represents 37.1% of GDP (a significant increase compared to 32.6% for 2021). The highest expenditure item is the service of the public debt. Allocations for the education, health, defense and social security departments decreased slightly in percentage terms compared to 2021, but increased in absolute numbers.

Zambia has not been very successful in improving tax collection in the long term. Domestic tax and non-tax revenues in 2022 are expected to reach 98.86 billion kwacha (this represents 57.15% of planned budget expenditures; 21.2% of GDP), another 1.82 billion kwacha is represented by grants from foreign donors. The remaining 72 billion kwacha on the expenditure side is to be financed by loans. After Zambia defaulted on its foreign debts in November 2020, it effectively lost access to international credit. The government thus obtains funds mainly through the issuance of government and central bank bonds denominated in kwachas on the domestic market. Zambia’s foreign debt in 2021 has reached almost US$40 billion. Nevertheless, the arrival of the new government marked a distinct increase in investor confidence in Zambian assets. The market price of Zambian Eurobonds increased in 2. half of 2021 by approximately a quarter and currently hovers around 75 cents on the dollar. Over the same period, the Zambian kwacha against the USD strengthened by more than a third to about 17 ZMW/USD by the end of the year. In addition to the change in government, Zambia owes this development to the high prices of copper in the international market. However, the annual volume of copper production for 2021 fell slightly to the level of 801 thousand. tons compared to 882 thousand tonnes for 2020. Zambia’s trade balance has been positive in recent years.

Banking system

The banking sector in Zambia is liberalized. The central bank – Bank of Zambia – has the function of banking supervision and management of monetary policy. The base interest rate was 9% as of April 2022, it has only been slightly increased by 0.5% over the past year in an attempt to moderate inflation, but on the other hand, not to jeopardize the economic recovery after the COVID-19 pandemic. Interest rates for business loans are very high and hover around 20% pa

Below is an overview of the most prominent banks in the country. With the exception of Zambia National Commercial Bank, these are subsidiaries of multinational groups. All these banks provide a standard spectrum of services, incl. letters of credit.

  • Zambia National Commercial Bank Plc (ZANACO) โ€“ Unlike the others listed below, this is a purely Zambian bank with the highest volume of assets in the country
  • Standard Chartered Bank Zambia Plc – the oldest bank in the country, best rated for e-banking services
  • FNB Zambia
  • ABSA Zambia
  • StanbicBank Zambia

Internet and mobile banking are widespread in the country. The use of payment cards for payments in shops, hotels and other establishments, especially in large cities, is common, but recently there have been relatively frequent cases of misuse of cards, especially when withdrawing money from ATMs (so-called skimming). Caution is therefore in order.

Tax system

The tax system in Zambia is rather confusing and unpredictable, and in recent years it has often been influenced by incoherent political decisions. An example could be the intention to replace VAT with sales tax (eventually abolished after massive criticism from the private sector) or the abolition of VAT and the suspension of the collection of consumption tax on fuel in January 2021 in an attempt by the government not to raise fuel prices before the upcoming elections. However, even the new government that emerged from the elections in August 2021 extended the suspension of the collection of excise duty on fuel until the end of the first half of 2022.

The Zambia Revenue Authority is responsible for collecting taxes (and duties) in Zambia, on whose website you can find detailed information on individual types of taxes.

The basic corporate income tax rate was reduced from 35% to 30% from 1 January 2022. Only companies operating in the telecommunications sector are subject to a higher rate of 40% for profits exceeding ZMW 250 million. Special rates are applied to farmers and food producers (10%), exporters of so-called non-traditional commodities, i.e. all commodities except copper and cobalt (15%), commercial activities connected with charitable activities (15%) and producers of chemical fertilizers (15%) ). Profits from activities in the hospitality sector (hotels, restaurants) are temporarily taxed at only 15% in order to provide relief to the sector that has been greatly affected by the COVID-19 pandemic (valid for the time being until the end of 2022). For the years 2022 and 2023, the collection of corporate income tax for manufacturers of ceramic products has been suspended in an effort to encourage business in this field.

The employer pays the personal income tax on behalf of its employees. A progressive tax rate is applied depending on the amount of annual income. The rates for 2022 are as follows:

  • up to ZMW 54,000: 0%
  • 54 001 – 57 600 ZMW: 25%
  • 57 601 – 82 800 ZMW: 30%
  • nad 82 800 ZMW: 37,5 %

The standard VAT rate is 16%. Among other things, basic foodstuffs, supplies for agriculture, healthcare and education, as well as transport and water management services, sale of land, or living spaces.

The tax rate on interest and dividends is 15% for residents and 20% for non-residents.

The further development of the taxation system is difficult to estimate, but the new government has nevertheless taken some positive steps towards the simplification and unification of tax rates. Among other things canceled the long-term criticized inclusion of tax from mining activities in the corporate income tax base (i.e. de facto double taxation). The government’s major task in the following period is to increase tax revenues in order to consolidate public finances.

Zambia Economics