Country risk rating


SENSITIVE RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD 25.7bn
Population 16.5mn
Form of state Republic
President Edgar Lungu
Next elections 2021, General election
  • The government already heeds advice on increasing investment and diversifying the economy
  • Sizable land and water resources should help to develop agriculture and increase productivity
  • Business climate should be improved, but is already good enough to attract new foreign investment
  • Succeeds in funding increasing financing needs despite the failure to reach an agreement with the IMF
  • Political risk: the opposition still disputes the results of the August 2016 Presidential election. A state of emergency announced in July 2017
  • High reliance on copper exports (69% of total)
  • Capital stock (110% of GDP) too low to spur higher growth rates on the long-run
  • Fiscal deficit and difficulty to raise higher fiscal revenues
  • Debt had increased: higher debt allows lower flexibility to finance massive infrastructure projects with debt. Lack of transparency has raised the issue of hidden debt

Slippery slope

Zambia is the 6th largest copper exporter in the world with 3.3% of the global market. As a result the country was hit by the metal price crisis, when overconsumption in China has put the sector under scrutiny. Yet evidence of oversupply is less striking than for other commodities (iron ore, steel). Thus, while Zambia experiences vulnerabilities, these are less extreme than for some oil or iron ore exporters.

Overall balances deteriorated. The current account moved from surplus (5.4% in 2012) to a sustainable deficit (-3.5% in 2017). This reversal was driven by an increasing fiscal deficit (-8% of GDP), a major issue given fiscal revenues amount to 15% of GDP. As a result of rising deficits, debt deteriorated despite low initial levels (public debt was 64% of GDP, and external debt 42% of GDP in 2017).

However, the recent policy orientation deteriorated further. The investment to GDP ratio increased to 44% with almost now visible impact on growth (+3.7% in 2018). The fiscal deficit increased markedly to -10% of GDP in 2018. This structural and rising fiscal deficit implied a steady increase of debt levels (public debt is at 71% of GDP and external debt at 45% of GDP in 2018). Rising debt also implied a deterioration of liquidity indicators, particularly foreign reserves at 2 months of import cover. Uncertainty on hidden debts had also detrimental consequences on confidence, triggering a sudden surge of spreads on the sovereign debt market.

The outlook darkens despite bright long-term opportunities

Zambia has started to invest in diversifying its economy. The business climate is overall supportive. The country ranks 87 out of 190 in 2019 in the World Bank Doing Business survey. But the capital stock stands at 110% of GDP, same as it was in 1993. Thus investors are in a position to make the most of Zambia’s potential and develop much-needed infrastructure.

Agriculture is a case in point. Only 25% of Zambia’s immense land resources (42 bn hectares) are used. The country controls 40% of central and southern African water resources. Improved power generation and irrigation are crucial to modernize agriculture, much like Kenya did with the floral industry. The biggest obstacle to achieving much-needed progress is, yet again, political stability.

The Zambian outlook progressively darkened. As other frontier economies, the country attracted foreign investors eager to benefit from the yields offered. However, rising debt (public debt should reach 79% of GDP in 2019) deterred investor confidence and credit spreads increased to about 1000 bps in the secondary market. The resulting -22% depreciation of the ZMK should now weigh on the inflation outlook (+12% in 2019), as well as on the growth outlook (+2.5% in 2019).

Political risks are weighing on the outlook

The political system evolved from a one-party state to a multiparty system in the nineties. After that, the results of presidential elections were regularly contested, e.g. in 1996, or in 2006. The Patriotic Front won the Presidential election in 2011, ending two decades of the Movement for Multi-Party Democracy in office. However, this alternance did not give political stability to the country. In 2015, the election of the current President E. Lungu with a narrow margin in front of the opposition leader H. Hichilema was heavily contested. The arrest of H. Hichilema in April 2017 resulted in massive demonstrations. The state of emergency was proclaimed in July 2017. Uncertainties other the possibility for E. Lungu to seek a new term in 2021 and his willingness to do it add to the uncertainty. In this perspective, fiscal slippage was used to increase population support, but was financed through rising debt (particularly to China).

Trade structure by destination/origin

(% of total)

Exports Rank Imports
Switzerland 40%
34% South Africa
China 19%
14% D.R.Congo
D.R.Congo 7%
8% Kuwait
South Africa 6%
8% China
Singapore 6%
5% U.A.E.

Trade structure by product

(% of total)

Exports Rank Exports
Non-ferrous metals 69%
15% Petroleum, petroleum products and related materials
Non metallic mineral manufactures 4%
12% Metalliferous ores and metal scrap
Tobacco and tobacco manufactures 3%
7% Specialised machinery
Cereals and cereal preparations 3%
7% Road vehicles
Sugar, sugar preparations and honey 2%
6% Other industrial machinery and parts

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings


Contact Euler Hermes

Economic Research Team

Stéphane Colliac

Senior Economist for France and Africa

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