CTPD WARNS MACROECONOMIC STABILITY HAS YET TO REACH HOUSEHOLDS, BUSINESSES

In its latest Monday Opinion column titled "Stability Is Returning. But Has the Economy Started to Breathe? – Part One: The Macroeconomy Beyond the Headline Numbers," CTPD Head of Research, Ibrahim Kamara, says Zambia has made significant progress in restoring macroeconomic stability but warns that stability should not be mistaken for economic recovery.

According to the analysis, annual inflation fell to 6.5 percent by the end of June 2026, marking a sharp improvement from the double-digit inflation that had weighed heavily on households and businesses in recent years. At the same time, the Zambian Kwacha appreciated by approximately 35.6 percent year-on-year, closing June at around K18.29 to the US dollar, while gross international reserves increased to US$6 billion, equivalent to 5.2 months of import cover.

Kamara says these developments demonstrate that Zambia is no longer facing the same level of external and price pressures that characterised the recent past.

However, he argues that macroeconomic improvements only become meaningful when they are reflected in people's daily lives.

"Citizens do not experience macroeconomic stability as a chart. They experience it through mealie meal, rent, school fees, transport, electricity, medicine and loan repayments," he states.

The analysis explains that falling inflation does not mean prices are declining, but rather that they are increasing at a slower pace. As a result, households that have already endured years of rising prices may not immediately feel any financial relief despite improving economic indicators.

CTPD identifies access to affordable credit as one of the biggest barriers preventing economic recovery from reaching businesses, particularly small and medium-sized enterprises (SMEs).

The organisation notes that although the policy interest rate stood at 13.5 percent in April 2026, the average commercial lending rate remained significantly higher at 28.6 percent.

Kamara says borrowing at nearly 29 percent is unsustainable for productive businesses, as it raises the cost of working capital, discourages expansion and investment, and forces many SMEs into survival mode instead of growth.

He argues that Zambia must now focus on ensuring that lower inflation, exchange rate stability and improved fiscal management translate into lower borrowing costs and increased lending to productive sectors of the economy.

The policy paper also highlights Zambia's debt servicing obligations as another major constraint on economic recovery.

According to CTPD's debt analysis, Zambia's total public debt stood at US$28.96 billion by the fourth quarter of 2025, with external debt accounting for US$17.51 billion, representing 60.5 percent of the total debt stock.

More significantly, the organisation says domestic debt servicing is placing greater pressure on Government finances. During the same period, total debt service amounted to US$4.87 billion, of which domestic debt accounted for US$4.30 billion, or 88.2 percent. Interest payments alone reached approximately US$2.01 billion, representing over 41 percent of total debt servicing costs.

Kamara says these obligations reduce Government's fiscal space, limiting its ability to finance development programmes while also encouraging commercial banks to invest in Government securities instead of extending loans to businesses.

He says that unless fiscal pressures ease, monetary policy alone will not be sufficient to stimulate broad-based economic recovery.

Looking ahead to the 2027 National Budget, CTPD is urging Government to prioritise reducing domestic borrowing, avoiding the accumulation of new arrears, and increasing investment in sectors that support productivity, including agriculture, energy and logistics.

The organisation further recommends that additional revenue generated by Government should not be consumed entirely by recurrent expenditure but should instead be used to strengthen fiscal credibility and create greater room for private sector expansion.

Kamara concludes that Zambia has moved beyond the worst period of macroeconomic instability, but says the real measure of success will be whether ordinary citizens begin to experience tangible improvements in their livelihoods.

"The economy will only breathe freely when better indicators translate into affordable credit, productive investment, resilient food systems and credible fiscal space," he said. 

[Brave Heart News  | UnlockingMinds]