Stability Is Returning, But Has the Economy Started to Breathe? Part One: The Macroeconomy Beyond the Headline Numbers
This week’s Monday Opinion focuses on Zambia’s emerging macroeconomic stability and asks a harder question: are the improving headline numbers beginning to translate into real economic breathing space for citizens, firms and the national budget?
Stability is not recovery
There is a difference between an economy that is stabilising and an economy that is already comfortable. Zambia appears to be entering that difficult middle ground. CTPD analysis of recent macroeconomic data shows why both optimism and caution are necessary. Annual inflation had fallen to 6.5 percent by end of June 2026, a clear improvement from the double-digit pressures that shaped much of the recent past. The Kwacha also strengthened significantly, with the end-month exchange rate at about K18.29 per US dollar in June 2026, representing a year-on-year appreciation of roughly 35.6 percent. Gross international reserves also improved to about US$6.0 billion, equivalent to 5.2 months of import cover.
These are not small movements. They suggest that the economy is no longer under the same intensity of external and price pressure. But citizens do not experience macroeconomic stability as a chart. They experience it through mealie meal, rent, school fees, transport, electricity, medicine and loan repayments among other things.
The pressure beneath the numbers
When inflation falls, prices do not necessarily fall. They rise more slowly. A household that has already absorbed several rounds of price increases does not immediately feel rescued by disinflation. The real test is transmission into everyday economic life.
The clearest warning sign is credit. In April 2026, the policy rate stood at 13.5 percent, but the average lending rate was about 28.6 percent. That gap matters. A lending rate close to 29 percent is not a recovery rate for small and medium enterprises. It is a survival rate. It makes working capital expensive, discourages expansion, slows investment and keeps many businesses operating below their potential.
This is the central macroeconomic challenge: Zambia must convert stabilisation into transmission. Lower inflation must influence expectations. Exchange-rate stability must reduce import-cost uncertainty. Improved fiscal management must ease pressure on domestic borrowing. Monetary stability must eventually create room for cheaper productive credit. Without this transmission, macroeconomic improvement remains trapped at the top of the economy.
Debt service is the hidden macro story
The second pressure is fiscal. CTPD debt diagnostics show that by the fourth quarter of 2025, total public debt stood at about US$28.96 billion. External debt remained the larger stock at about US$17.51 billion, or 60.5 percent of the total. But the heavier short-term budget pressure came from domestic debt service.
In the same quarter, total debt service was about US$4.87 billion. Of this, domestic debt service accounted for about US$4.30 billion, or 88.2 percent. Total interest payments alone were about US$2.01 billion, equivalent to 41.3 percent of total debt service. The issue is not only how much Zambia owes, but how much must be paid, rolled over or refinanced before new priorities are funded.
Why fiscal space matters
This is why macroeconomic stability must be judged alongside fiscal space. If Government faces heavy debt-service obligations, arrears pressure and high domestic financing needs, the financial system remains strained. Banks have strong incentives to hold government paper rather than lend aggressively to productive sectors. In that environment, monetary easing alone cannot deliver broad-based recovery.
Fiscal policy must therefore help unclog the credit channel. The 2027 Budget should avoid new arrears, reduce domestic financing pressure, prioritise productivity-enhancing expenditure and protect sectors that ease inflation pressures, especially food, energy and logistics. Revenue gains should not be absorbed entirely by recurrent pressures. Some must be used to restore fiscal credibility and create room for the private sector to breathe.
From stability to breathing space
The next phase of Zambia’s economic management is not simply about maintaining lower inflation or a stronger currency. It is about turning stability into lower business costs, cheaper productive credit, more predictable public spending and visible household relief.
Government should also communicate this transition honestly. Falling inflation is progress, but not the same as falling prices. A stronger currency is progress, but not automatically cheaper production. Lower macroeconomic stress is progress, but not yet broad-based recovery.
Zambia is no longer where it was at the height of macroeconomic pressure. That is good news. But the harder test begins now. The economy will only breathe freely when better indicators translate into affordable credit, productive investment, resilient food systems and credible fiscal space.
Look out for Part Two next week, where We ask what Zambia must do to turn macroeconomic stability into jobs, lower living costs, stronger public services and meaningful fiscal breathing space.
About the Author. Ibrahim Kamara is Head of Research at the Centre for Trade Policy and Development (CTPD). He holds degrees in Economics and Finance, and a Master’s in Public Finance and Taxation from the University of Lusaka. He is currently pursuing a second master’s degree in Economics at the Copperbelt University. His work focuses on applied economic research for policy reform, supported by experience in financial journalism and public policy analysis.
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