Zambia’s new President turns country from default to investor darling within a week

Zambia’s new President, Hakainde Hichilema, appears to be turning the nation’s economic fortunes around barely a week after inauguration.

This is because the nation’s currency and dollar bonds have surged to become the world’s best performers since he was announced the winner of the August 12 elections.

His appointment of economist Situmbeko Musokotwane as finance minister has gone down well with investors, as have his pronouncements that he’ll speedily conclude a financing deal with the International Monetary Fund and court foreign investment.

This is in contrast to the bad news Zambians have grown used to in recent years.

Production of copper, which accounts for more than 70% of export earnings, stagnated as the government clashed with mining companies. The kwacha currency depreciated from 5.10 to the dollar at the end of 2011 to a record low of 22.68 this year. Annual inflation reached almost 25% in July, the highest level in nearly two decades.

The change in power has brightened the nation’s economic prospects, with investors optimistic that the new administration will drive a sustained recovery, and restructure almost $13 billion in external loans after securing IMF funding. While Hichilema had said he hopes to reach a deal with the fund by April, Musokotwane is targeting October.

“It’s night and day at the moment,” said Neville Mandimika, economist and fixed income strategist at FirstRand Bank in Johannesburg. “The expectation has been completely raised.”

Hichilema (59) studied economics in the UK, served as the CEO of an accounting firm and unsuccessfully ran for the presidency five times before finally winning this month. The late President Michael Sata, whose party he dislodged from power, dubbed him “calculator boy” – a snipe at his economic jargon-laden speeches.

Hichilema capitalized on widespread discontent over rampant unemployment and soaring prices, especially among young voters, to secure his landslide election win.

He was sworn in on August 24 and pledged to stabilise the nation’s finances following years of overspending by his predecessor Edgar Lungu’s administration that culminated in Zambia becoming the first African sovereign debt defaulter since the coronavirus pandemic struck.

High on the new administration’s list of priorities is mending ties with the mining industry.

Musokotwane wants to more than double annual copper production to as much as two million metric tonnes by 2026. That would help bolster foreign reserves, which had dwindled due to rising debt-servicing costs.

“You will be amazed how much foreign exchange this country is going to make,” the finance minister said on Friday after being sworn in. “You will not know what to do with the dollars that this country will be receiving.”

(TODAY.NG)