By Chris Mfula
LUSAKA (Multibagger) - Zambia is targeting a significant economic growth rebound and a reduction in its budget deficit for the upcoming year, following the impact of a severe drought, according to Finance Minister Situmbeko Musokotwane.
The country is aiming for a growth rate of 6.6% in 2025, a stark improvement from the forecasted 2.3% growth in 2024, driven by a better performance in the mining and agriculture sectors.
The El Nino-induced drought had devastated crops in southern Africa, leading to food shortages and affecting the region's economic outlook this year.
Zambia is looking to decrease its budget deficit to 3.1% of GDP in 2025, down from the projected 6.4% in 2024. The majority of next year's spending will be covered by domestic revenues (80%), with 4% from grants and 16% from borrowing.
Furthermore, the country is in negotiations with commercial creditors for debt restructuring, following the recent completion of a Eurobond restructuring exercise. Zambia has reached provisional agreements with Industrial and Commercial Bank of China and China Development Bank, which align with the International Monetary Fund program and the "Comparability of Treatment principle."
The prolonged debt restructuring process has hindered investment and impacted local financial markets in Zambia.
Analysis:
Zambia's plan for economic growth and budget deficit reduction in 2025 signals a positive outlook for the country's recovery from the drought-induced challenges. The focus on key sectors like mining and agriculture is expected to drive the growth momentum. Additionally, the efforts to restructure debt with commercial creditors indicate a commitment to improving the country's financial stability.
Investors and stakeholders should monitor Zambia's progress in achieving its targets, as a successful rebound could present new investment opportunities in the region. However, risks related to debt restructuring and economic uncertainties should also be considered when evaluating potential ventures in Zambia.