Zambia’s currency, the kwacha, has reached new record lows as the country grapples with a prolonged drought that continues to hinder its economy.
The kwacha is currently trading at 27.95 per dollar, just above its previous record low of 28.05 from Tuesday. This marks a 3% decline since Zambia’s debt restructuring deal, which had initially raised hopes for a positive shift in sentiment.
Analysts had anticipated that the country’s emergence from default would stabilize the currency, but the ongoing drought has intensified the pressure. The drought has led to a significant slowdown in the hydroelectric-dependent economy, further weakening the national currency.
Access Bank Zambia noted in a research report that the country is struggling with the combined impact of a severe drought and reduced industrial activity. “Mining companies, crucial to Zambia’s foreign revenue, are being forced to cut copper production,” the report stated.
The devastating El Niño-induced dry spell has plagued southern Africa, resulting in the worst drought the region has seen in over a century. Zambia’s authorities have also been forced to reduce electricity generation at the Kariba dam, the nation’s primary power source.
The kwacha had suffered a sharp plunge after Zambia defaulted on $11 billion of external debt in 2020, but the currency briefly gained 20% in February 2024 after the country’s successful restructuring efforts.