Zambia’s kwacha has reached a series of historic lows since the start of 2025, with a severe drought continuing to weigh heavily on the nation’s economy. Despite hopes that Zambia’s exit from default early last year would bolster market confidence, the currency remains about 3% lower than before the country’s debt restructuring and has depreciated by nearly 15% in the last six months.
On Wednesday, the kwacha was trading at 27.95 per dollar, just above its latest record low of 28.05 on Tuesday.
Analysts attribute the currency’s continued weakness to the prolonged drought, which is severely affecting Zambia’s hydroelectric power generation. This has led to an industrial slowdown, with mining companies reducing copper output – a crucial source of foreign exchange for the country. “Zambia is facing a severe drought, which is contributing to the currency’s weakness as the economy grapples with the impact on key industries,” said Access Bank Zambia in a research note.
The El Niño-driven drought, the worst to hit southern Africa in a century, devastated crop yields last year and forced the Zambian government to cut electricity production from the Kariba Dam, the nation’s largest power source.
The kwacha had plunged after Zambia defaulted on $11 billion of external debt in November 2020. However, it briefly surged by 20% in February when it became clear that Zambia’s debt restructuring efforts would succeed.
In Lusaka, one financial analyst noted that some businesses had sold dollars on Wednesday in preparation for local tax payments due next week, providing a slight boost to the kwacha.