CONTINUED ANGER TOWARDS PF SHOULD GIVE HH SPACE, WIN
2ND TERM – EIU
By Ernest Chanda
THE Economist Intelligence Unit (EIU) says for President Hakainde Hichilema to win the 2026 election, he has to execute a serious clampdown on corruption.
It argues that continued anger towards the PF, over the debt default, should give the President political space to carry out his mandate and win a second term, “albeit nowhere near as convincingly as in 2021”
Founded in 1946, the EIU forecasts economic trends, political forces and industry developments in every country in the world.
The UK based institution combines data, analysis and forecasting to guide informed decisions by businesses and policymakers.
“The copper sector accounts for about 70 per cent of Zambia’s export earnings, and about one-third of government revenue. EIU expects the strong international demand driven by the green energy transition to bolster economic growth in the medium to long term. The President, Hakainde Hichilema, will remain in power until at least 2026 but the afterglow of the democratic transition of power in 2021 will fade as debt restructuring is accompanied by IMF-required austerity,” says the EIU in its July 17, 2024 report on Zambia’s political and economic outlook. “A clampdown on corruption will be necessary for Mr Hichilema to be re-elected in 2026. Zambia is in sovereign default, but has reached restructuring agreements with official creditors and bondholders. Officials are now negotiating with commercial creditors, and we expect a comprehensive debt treatment to be realised in the second half of 2024, forging a path out of the debt crisis for the country.”
The EIU also predicts a weakened gross domestic product (GDP) for Zambia this year due to tight fiscal and monetary policy.
“Real GDP growth will weaken in 2024, owing to still-tight fiscal and monetary policy and sharp contractions in the agricultural and mining sectors as the country grapples with its worst drought in four decades. We expect growth to strengthen in 2025-28 as increasing mining output boosts exports and fiscal consolidation supports investor confidence. Owing to a prolonged drought and its expected effect on food and energy security, inflation will rise in 2024, to 15.6 per cent, well above the eight per cent ceiling of the target range,” EIU says. “Inflation will remain above the 6-8 per cent target range until 2026 given tight local food supply. We expect Zambia to run a current-account surplus in 2024 owing to financing inflows for drought-relief measures. The current-account surplus will widen further in 2025-27 as copper output steadily recovers and prices rise. Zambia relies on copper exports for foreign-exchange earnings and government revenue. Copper prices are expected to rise in 2024, but years of undercapitalisation in copper mines and drought-induced production constraints will limit copper export revenue.”
On political stability, the EIU expects President Hichilema to serve out his first full term “in the absence of a credible opposition”.
“In the absence of a credible opposition, EIU expects the President, Hakainde Hichilema, to serve out his first full term, which ends in 2026. Mr Hichilema was elected in 2021 on a mandate to turn around the economy’s fortunes after Zambia’s sovereign default in 2020. This remains a voter priority. Zambia’s economic woes cannot be easily resolved, as the sovereign default has left the government with limited fiscal capacity. To reassure creditors, it is imperative that the government continue with the macroeconomic consolidation strategy set out in its US $1.3 billion extended credit facility (ECF), which was agreed with the IMF in 2022,” EIU notes. “This requires tight control over the public finances and, given pressing development needs, will rub against popular demands for state support for households, especially given high inflation early in the forecast period. Zambia is grappling with its worst drought in four decades. Officials estimate that drought relief measures will cost about US $940 million. Budgetary support- in the form of adjustmentto the 2024 national budget, an imminent IMF disbursement (valued at $575m) and funding from international partners (valued at US $500m) will finance drought¬relief commitments. The drought’s impact on household welfare will be enormous, and the government response will be short of comprehensive.”
The EIU has also noted conditions for violent protests over economic hardships going by the country’s history.
“Zambia has a history of spontaneous, brief but violent protests following periods of economic hardship, and the conditions for flare-ups in cities such as the capital, Lusaka, are present. However, donor and IMF inflows put the government in a position to prevent the collapse of safety nets, and a breakdown in political stability is not expected,” the EIU says. “Although the Hichilema administration has promised to clean up government, corruption remains a major public concern. Some media outlets and opposition groups have labelled anti-graft efforts by the current administration largely superficial. More positively, Mr Hichilema’s re-engagement with Zambia’s traditional investment and development partners will play well with sections of society that had become concerned about the growing economic role of China under the previous administration (a cause of unrest in the past).”
On election watch, the EIU claims that people’s continued anger towards the main opposition party, PF, will secure victory for President Hichilema in 2026.
“The next legislative and presidential elections are due in 2026. In the 2021 presidential election, Mr Hichilema won 59 per cent of the vote compared with 38.7 per cent for Edgar Lungu, the then incumbent. Our core scenario assumes that Mr Hichilema will successfully negotiate the final phase of debt restructuring with commercial creditors before end-2024, permitting a degree of economic recovery before the next poll,” says the EIU. “Harsh austerity measures will still be required, but continued anger towards the main opposition party, the Patriotic Front, over the debt default, should give the President political space to carry out his mandate and win a second term, albeit nowhere near as convincingly as in 2021.”