WORLD BANK: New Grants and Loans

The ZEU highlights that agriculturethe cornerstone of Zambia's employment and heavily dependent on rainfed farmingfaced significant headwinds.However, its minimal contribution to GDP allowed overall growth to continue.Despite economic growth, GDP per capita growth slowed to 1.2% in 2024, and poverty remains pervasive, with 63.1% of the population living below the $2.15 poverty line."Notwithstanding these challenges, it is commendable how the government of Zambia has stayed fiscally disciplined amidst increasing financing needs caused by the drought, within the framework of ongoing debt restructuring and an IMF programme," said Albert Pijuan, World Bank Senior Country Economist for Zambia."Revenues increased thanks to expanded copper productionalthough they remain below potentialand investment spending was significantly reduced, allowing for a large primary surplus in 2024."The ZEU report highlights that exchange rate depreciation, combined with rising food and energy prices due to the drought, led to sticky double-digit inflation.The Zambian kwacha depreciated against major currencies because of sporadic foreign exchange supply and increased import demand during the drought.Despite monetary policy tightening to restrain inflation, prices continued to drift, and the policy stance remains accommodative as high supply-driven inflation results in negative real rates.