Economy showing signs of hope – ZICA
By Ludia Ngwadzai
ZAMBIA’S improving macroeconomic outlook is offering cautious hope for businesses, but emerging fiscal pressures and structural challenges will continue to test the resilience of the private sector, says the Zambia Institute of Chartered Accountants (ZICA).
Speaking during the first quarter briefing, ZICA president Yande Mwenye outlined a mixed economic landscape that signals recovery on paper but presents a more complex picture for investors and enterprises operating on the ground.
Mwenye said Zambia’s economy showed notable signs of stabilisation in beginning of the first quarter, with inflation easing to 7.1 per cent in March, supported by a stronger kwacha and a record maize harvest.
She said the fiscal deficit had also narrowed significantly, dropping from 9 per cent of the country’s gross domestic product (GDP) in 2021 to a projected 2.1 per cent this year.
“For businesses, these developments translate into a more predictable operating environment. Lower inflation and improved fiscal discipline typically reduce borrowing costs, stabilise exchange rates and enhance investor confidence, key ingredients for private sector growth,” she said.
Mwenye said the successful completion of the International Monetary Fund (IMF) Extended Credit Facility (ECF) programme, after injecting US$1.7 billion into the economy, strengthens Zambia’s credibility on international markets.
“This stamp of approval is expected to improve access to capital and attract foreign investment, particularly in mining and agriculture,” she said.
However, Mwenye said the business community faces mounting cost pressures, largely driven by global fuel price shocks linked to geopolitical tensions.
“While government intervention, such as suspending fuel-related taxes, has cushioned petrol prices, diesel and kerosene costs have risen sharply. For transport-dependent sectors like agriculture, manufacturing and logistics, this imbalance is significant,” she said.
She said diesel remains a primary input in production and distribution, meaning higher costs would likely force through supply chains, raising prices and squeezing profit margins.
Mwenye warned that the temporary tax measures, while necessary, risk undermining fiscal gains if not carefully managed.
She said reduced government revenue could constrain spending on infrastructure, healthcare, and education sectors that indirectly support business productivity.
“The introduction of the Local Content Act, which mandates increased participation of Zambian suppliers in the mining sector, is expected to stimulate local enterprise development and expand domestic supply chains. For SMEs, this presents a significant opportunity to integrate into high-value industries,” she said.
Mwenye said the lifting of maize export restrictions opens new regional markets for farmers and agro-processors.
She said increased demand could drive higher incomes, encourage investment in value addition and boost foreign exchange earnings.
“These are policy shifts that can fundamentally reshape Zambia’s business landscape. But their success will depend on effective implementation and support for local producers,” she said.
Mwenye said increased government borrowing in domestic markets may crowd out private sector access to credit, making financing more expensive and harder to obtain.
She raised concerns about the proposed Tax Administration Act, particularly the expanded powers of the revenue authority without corresponding safeguards.
“From a business perspective, the absence of an independent Tax Ombudsman could heighten compliance risks and reduce confidence in the fairness of the tax system. Investors typically favor jurisdictions where regulatory frameworks balance enforcement with accountability,” she said.
Mwenye added that Zambia stands at a critical transition point from economic stabilisation to sustainable growth.
She said while macroeconomic indicators were improving, businesses must navigate rising input costs, policy uncertainty, and evolving regulatory frameworks.
