A football manager does not win a match simply because he picked a good formation in the dressing room. Pep Guardiola has shown how a 4-3-3 can evolve during a match, Jürgen Klopp demonstrated the power of aggressive pressing, and Diego Simeone built competitive sides around defensive discipline and rapid transitions. Their success was never just about the numbers on the team sheet. It depended on the quality of the players, how well the system connected them and the ability to adapt when circumstances changed.But there is another question worth asking about any national team: who gets the opportunity to wear the jersey in the first place? A manager can have an excellent formation, but if the talent scouts overlook players outside a handful of familiar clubs, the team may never reach its full potential.That question has implications beyond football. As Zambia embarks on the Grow Zambia Agenda, the country must think not only about the economic formation it has chosen, but also whether that formation allows productive talent, investment and opportunity to emerge from across the country.The Government has set out an ambitious starting formation: 10 million tonnes of maize, 10,000 megawatts of electricity, five million tourists, three million tonnes of copper, three million tonnes of soya beans, one million tonnes of wheat, one million tonnes of sugar and US$1 billion in beef exports.It is an ambitious 10-10-5-3-3-1-1-1 formation. And there is merit in having a clear set of national ambitions. After years in which the economic conversation was dominated by debt restructuring, fiscal consolidation and restoring macroeconomic stability, a stronger focus on productive expansion is welcome. Stabilisation is necessary, but it cannot be the final destination. Zambia needs more investment, higher productivity, competitive exports and a broader base of economic activity.Grow Zambia offers a framework around which those ambitions can be organised. The challenge is to turn the framework into a functioning economic system—and ensure that its benefits reach beyond the sectors and locations already best positioned to take advantage of growth. <h2>Targets are the starting positions, not the strategy</h2>A football formation establishes where players begin. It does not guarantee that they will create chances, defend effectively or win matches. Economic targets work in much the same way.Producing 10 million tonnes of maize will require more than increasing the number of hectares planted. It will depend on yields, irrigation, access to inputs, extension services, storage, transport and reliable markets. If output rises but farmers continue to face high production costs, poor market access and weak bargaining power, the national production target could be met without delivering a corresponding improvement in rural incomes.The copper target is similarly dependent on investment, electricity, transport, skills and a predictable regulatory environment. Five million tourist arrivals will require more than successful marketing. Connectivity, accommodation, tourism infrastructure, visitor experiences and the cost of travelling within Zambia will matter. A US$1 billion beef export industry will depend on livestock productivity, veterinary services, disease control, processing facilities, cold chains and access to markets that meet international standards.These are not arguments against the targets. They are arguments for taking them seriously enough to address the systems behind them.The targets are also interconnected. Reliable electricity supports mines, factories and agro-processing. Better roads connect farmers to markets and exporters to transport corridors. Financial services help businesses invest. Digital systems can lower transaction costs and improve access to information. Skills and institutions connect all these investments to productive outcomes.In football terms, Zambia needs a strong midfield: the infrastructure, finance, skills and institutions that connect the sectors expected to lead growth. Without that connective tissue, individual sectors can perform well while the wider economy fails to capture the full benefit. <h2>The national team must draw from the whole country</h2>This is where the debate becomes more important than the headline production figures.Zambia's economic potential is not concentrated in one city, one province or a small group of established businesses. It is distributed across farmers, traders, manufacturers, tourism operators, artisans, technology entrepreneurs and communities with different resources and constraints. Yet the ability to turn potential into productive activity is not evenly distributed.A business in Lusaka may have easier access to banks, professional services, reliable internet, skilled workers and major markets than a small enterprise in a rural district. A farmer near a good road may be better placed to supply a processor than one whose produce must travel over poor roads. A young person in an urban centre may have more opportunities to acquire digital skills, connect with employers or access business networks than someone equally capable in a remote community.These differences are not simply social concerns sitting outside the growth agenda. They are economic constraints.When a capable entrepreneur cannot obtain finance because the business is too small or too far from established networks, potential investment is lost. When a farmer cannot reach a market at a reasonable cost, productive capacity is wasted. When a young person cannot access relevant skills or reliable digital infrastructure, the economy loses potential workers, innovators and taxpayers.The question, therefore, is not whether every district can immediately develop the same industries or produce the same output. Geography, natural resources and comparative advantage will inevitably shape economic activity. The question is whether people and businesses across the country have a credible route into the opportunities created by national growth.A strong economic formation should allow different regions to contribute according to their strengths while benefiting from the wider economy. Copperbelt mining should generate opportunities for local suppliers, engineers and manufacturers. Agricultural growth should create markets for rural producers and opportunities for processors. Tourism should generate business for communities, transport operators, food suppliers and cultural enterprises. Digital transformation should make it easier—not harder—for people outside major urban centres to participate.If growth is concentrated among firms and households already equipped to benefit, Zambia may increase national output without fully mobilising its national talent.That is the equivalent of selecting a national team from only a few clubs when capable players are available throughout the country. <h2>Growth is not the same as shared prosperity</h2>There is an important distinction between an economy growing and the living standards of its population improving broadly.Gross domestic product can rise because mining output expands, agricultural production increases or investment accelerates. These are positive developments. But the distribution of the resulting income, the quality of jobs created and the opportunities available to different households will determine how widely that growth is experienced.This is where the Gini coefficient becomes relevant. It is a measure of income or consumption inequality: broadly, a higher value indicates a more unequal distribution, while a lower value indicates a more equal distribution. It does not tell the entire story of poverty or opportunity, and it should not be treated as a substitute for other indicators. But it helps raise a question that headline growth figures cannot answer on their own: who is benefiting from economic progress?Zambia could meet several production targets and still face a situation in which many households struggle to afford essential goods, small businesses remain constrained by expensive credit, and young people cannot find productive employment. That outcome is not inevitable, but neither is it ruled out by higher production.The structure of growth matters. Does agricultural expansion increase farm-gate incomes, or do farmers remain exposed to high input costs and weak bargaining power? Does mining expansion create local supply chains and skilled employment, or does much of the economic activity remain disconnected from domestic businesses? Does tourism growth generate opportunities for communities around attractions, or are local enterprises unable to meet the requirements of the market? Does manufacturing expansion create accessible jobs and develop local capabilities?These are questions of economic design, not arguments against growth.Nor should inequality be reduced to a simple rural-versus-urban divide. There are poor households in cities and prosperous producers in rural areas. Inequality can exist within provinces, industries and communities. The underlying issue is whether access to opportunity depends too heavily on where a person is born, the assets their family already possesses or the networks they can access.A credible national growth strategy should seek to widen the routes through which people can become productive. That means improving education and healthcare, strengthening agricultural extension, expanding access to infrastructure, supporting skills development and making finance more accessible to viable businesses. It also means evaluating whether public investment is reaching areas where it can unlock productive potential.The ultimate test is not whether every region grows at the same rate. It is whether people have a fairer chance to participate in, and benefit from, the country's development. <h2>The role of government is to create the conditions for growth</h2>The private-sector emphasis in Grow Zambia is important. Government cannot finance or operate every productive enterprise. Sustainable growth will require businesses that invest, innovate, employ people and compete in domestic and international markets.Government's role is to create the conditions in which that activity becomes possible: predictable policies, efficient public services, reliable infrastructure, appropriate financing arrangements and credible regulation. Public-private partnerships, joint ventures and capital-market instruments can help mobilise investment, but financing structures do not automatically create productive outcomes. Projects must be commercially viable, risks must be allocated sensibly, and public liabilities must remain transparent and manageable.The same principle applies to the Constituency Development Fund. With allocations scaled up to K40 million per constituency, there is an opportunity to improve local infrastructure, support skills development and address practical constraints on economic participation.A road that connects farmers to a market can reduce transport costs. A reliable water system can support production and improve living standards. Skills programmes linked to actual labour-market needs can help young people secure productive work. Digital facilities can improve access to information and services.But expenditure is not itself a measure of development. The relevant questions are whether projects are completed properly, whether they address genuine constraints, whether communities can maintain them and whether they generate lasting benefits. Public investment should be assessed by what it enables people and businesses to do—not simply by how much money has been allocated or spent.This also requires a more deliberate connection between local development and national economic priorities. If Zambia wants more agro-processing, constituencies need to consider the infrastructure, skills and enterprise support that make processing viable. If tourism is to expand, local investment should help communities connect to visitor markets. If the digital economy is to grow, connectivity and skills must extend beyond the places where access is already strongest.Decentralisation becomes economically meaningful when it brings decision-making closer to local needs and gives communities a practical stake in national development. <h2>A formation must adapt when the conditions change</h2>Even a well-designed economic strategy will encounter conditions it cannot control.Inflation can accelerate, the kwacha can depreciate, interest rates can change, copper prices can fluctuate, fuel can become more expensive and drought can undermine agricultural output. Global demand and capital flows can shift. Several pressures can also emerge at once.This is why the formation must be flexible.If inflation rises persistently and currency pressures intensify, policymakers may need to place greater emphasis on macroeconomic stability, fiscal discipline and protecting purchasing power. If inflation moderates sustainably and financing conditions improve, there may be more room for productive investment and faster expansion. If copper prices rise, Zambia can use the opportunity to strengthen infrastructure and accelerate diversification. If prices fall, the economy should be better positioned to draw on agriculture, tourism, manufacturing and services rather than allowing an external shock to undermine the entire growth programme.Such flexibility should not mean abandoning targets whenever implementation becomes difficult. It means adjusting the sequence, pace and instruments of policy while preserving the long-term objective.Macroeconomic stability is central to that capacity. Inflation, interest rates, exchange rates, public debt and foreign reserves may appear less exciting than production targets, but they affect the cost of investment, household purchasing power and business competitiveness. Expensive credit can prevent viable firms from expanding. Sharp exchange-rate movements can raise the cost of machinery, fuel and industrial inputs, even as depreciation may improve the local-currency value of export earnings.Stability and growth are not opposing objectives. Stability provides the foundation on which sustainable expansion can be built. But stability without productivity-enhancing investment can leave an economy orderly without becoming significantly more productive. Zambia must avoid both extremes: pursuing expansion without regard to macroeconomic constraints, and treating stabilisation as an end in itself.The same principle applies to implementation. A public performance framework should track not only headline output but also the conditions that make it sustainable. Agriculture should be assessed through yields, irrigation, farm-gate prices and market access. Mining should be measured alongside investment, productivity, energy reliability and local value addition. Tourism should be evaluated through visitor spending and length of stay, not arrivals alone. Energy policy should consider transmission capacity and the reliability of supply to businesses.These measures should be examined alongside inflation, exchange rates, interest rates, private-sector credit and fiscal performance. Regular reviews would help policymakers identify bottlenecks early, redirect resources where necessary and distinguish temporary shocks from deeper structural problems.The agenda should function as a living economic management system, not merely a document whose success is judged at the end of five years. <h2>The real test comes in 2031</h2>There is much to commend in setting clear national production ambitions. Zambia needs direction, investment and a stronger focus on expanding its productive capacity. Grow Zambia gives the country a framework around which government, businesses and development partners can organise their efforts.But the success of that framework will depend on more than the headline targets. It will depend on whether infrastructure connects productive regions to markets, whether financing reaches viable businesses, whether skills match economic needs and whether public institutions can translate plans into results.It will also depend on who gets to participate.By 2031, Zambia should be asking not only whether it produced more maize, copper, sugar or electricity, but whether farmers earned more from their work, whether businesses beyond the established commercial centres could grow, whether young people found productive opportunities, whether communities gained from nearby economic activity and whether improvements in national output translated into better living standards.The country does not need every district to become a mining hub or every province to grow in precisely the same way. It needs an economy in which different regions can build on their strengths, connect to national markets and contribute to shared prosperity.The formation is a useful starting point. The targets establish ambition, and the emphasis on productive expansion deserves credit. But a formation is only as strong as the system that supports it—and a national team is only as good as the talent it discovers, develops and gives an opportunity to play.The ultimate test of Grow Zambia will not simply be how much the country produces. It will be whether Zambia builds an economy capable of mobilising its full productive potential, adapting to changing conditions and translating growth into wider opportunity.The formation is set. The question is whether the whole country gets a chance to play—and whether the system can turn that talent into national progress.

Grow Zambia: The Formation Is Set, But Can Zambia Change Shape?

Zambia has become better at stabilising its economy. Whether it can turn that stability into growth is a much harder question.The proposed US$1.472 billion IMF programme puts that question at the centre of economic policy. After years of debt restructuring and fiscal adjustment, the country is being asked to sustain a primary surplus, rebuild fiscal buffers and attract the private investment needed to expand productive capacity.The difficulty is that these objectives do not automatically reinforce one another. Fiscal discipline can restore confidence, but if achieved by suppressing productive investment, it can also constrain future growth. Meanwhile, growth that fails to broaden the tax base leaves government with limited room to finance development without accumulating more debt.This is the central tension in Zambia’s next phase: the country must preserve the gains from stabilisation without allowing stabilisation itself to become a constraint on growth. Zambia is entering its next IMF programme from a very different position than it was four years ago.Inflation is down. Foreign reserves have been rebuilt. Debt restructuring has materially changed the country's financing profile. The economy is expected to grow by 5.6% in 2026.And yet the government's fiscal position weakened this year.That combination explains why the new US$1.472 billion, 36-month IMF Extended Credit Facility is more interesting than the headline suggests.This is no longer primarily a rescue programme.It is an attempt to lock in the gains from stabilisation while forcing Zambia to confront the next problem: how to generate faster, more productive growth without reopening the fiscal problems that produced the debt crisis.That is a much harder assignment. <h2>Zambia's fiscal problem did not begin with the IMF</h2>It is worth putting the new programme in historical perspective.For much of the past decade, Zambia's public finances were characterised by persistent deficits.The IMF's fiscal data show sizeable deficits through 2016–19, followed by the extreme deterioration associated with the pandemic and sovereign default. The fiscal deficit widened dramatically in 2020 and 2021 before consolidation began under the previous IMF programme.The important change since then has been the primary balance.Zambia has moved from large primary deficits into primary surplus territory. Under the previous programme, the IMF initially targeted an improvement in the primary balance from a 6% of GDP deficit in 2021 to a 3.2% surplus by 2025.That adjustment has largely happened.So when the new programme talks about reaching a 3% primary surplus by 2029, it is not proposing something Zambia has never done.It is asking Zambia to sustain a degree of fiscal discipline that has already been achieved — and to sustain it for longer.That distinction matters. <h2>But a primary surplus is not a balanced budget</h2>This is where the public debate can easily become confused.A 3% primary surplus does not mean Zambia will have a budget surplus of 3% of GDP.Interest payments are excluded from the primary balance.Zambia can therefore collect more revenue than it spends on everything from salaries and social programmes to capital projects, while still spending more overall once debt-service costs are included.The IMF's recent projections illustrate the point. Zambia's primary position has improved substantially, but the overall deficit remains.This is one reason the new programme should not be interpreted as Zambia suddenly becoming a surplus country.It is better understood as a country trying to maintain a sufficiently large pre-interest fiscal surplus to keep debt on a sustainable path. <h2>And here is the difficult part</h2>The IMF's own assessment identifies the central tension.With expenditure already being kept tight, maintaining primary surpluses above 3% of GDP could leave capital investment subdued unless Zambia succeeds in raising more revenue.That is the real policy problem.Zambia needs fiscal discipline.But Zambia also needs roads, electricity generation, irrigation, water infrastructure, digital infrastructure and human capital.Cutting investment can improve this year's fiscal number.It does not necessarily improve next year's productive capacity.The distinction between cutting waste and cutting investment will therefore become increasingly important. <h2>Revenue is the hinge</h2>This is why the new programme's emphasis on domestic revenue mobilisation deserves more attention than the US$1.47 billion financing figure.The IMF says non-grant revenues increased by 2.6 percentage points of GDP between 2022 and 2025, reaching 22.6% of GDP by the end of 2025.The next phase requires that trend to continue.If government can collect more through better tax administration, compliance and a more coherent tax system, it can maintain fiscal discipline without relying excessively on spending cuts.If revenue disappoints, the adjustment becomes harder.And Zambia has just been given a reminder of that risk. <h2>2026 is the warning</h2>The IMF says the fiscal position weakened this year because revenues underperformed, particularly VAT and fuel-tax collections.At the same time, expenditure rose sharply because the Food Reserve Agency spent substantially more than had been budgeted.This is more than a technical budget deviation.It illustrates the difficulty of running a tightly managed fiscal programme in an economy where government is still expected to respond to agricultural, energy and social pressures.The FRA is a particularly useful example.Food security is a legitimate policy objective. But when agricultural interventions generate expenditure significantly above budget, the cost ultimately appears somewhere in the public finances.The new programme therefore places greater emphasis on FRA oversight, state-owned enterprises and public-private partnerships.That is fundamentally about controlling fiscal risks before they become another debt problem. <h2>The economy is now asking a different question</h2>The encouraging part of the IMF assessment is that Zambia is no longer being discussed primarily through the language of crisis.The IMF expects 5.6% growth in 2026, supported by agriculture, mining and exports. Inflation has fallen to 6.1%, while reserves have risen to US$6.1 billion.Those are meaningful improvements.But they should not be mistaken for structural transformation.Zambia can grow at 5–6% and still struggle to generate enough productive employment.Mining can expand while remaining relatively capital-intensive.Agriculture can perform strongly in a good rainfall year without substantially increasing productivity.And GDP can rise without household incomes improving proportionately.For Zambia, therefore, the composition of growth matters almost as much as the growth rate. <h2>Copper can lift the economy. It cannot transform it alone.</h2>Mining is likely to remain one of Zambia's major growth engines.That is not a weakness in itself.The problem arises if copper remains primarily an export commodity rather than becoming the foundation for a wider industrial ecosystem.The opportunity is to build more Zambian capability around mining: engineering services, equipment, logistics, fabrication, processing, technology and specialised business services.The same logic applies to agriculture.The economic opportunity is not simply producing more maize.It is developing irrigation, storage, agro-processing, cold chains, logistics, inputs and regional markets.That is what makes the government's language around value addition, production and exports important.The test is whether those words translate into investment. <h2>Electricity could determine whether the growth story holds</h2>There is an even more immediate constraint.Electricity.Zambia cannot seriously pursue industrialisation while energy supply remains unreliable.The IMF expects improved electricity supply to support medium-term growth.But fixing the power constraint requires capital at precisely the moment when fiscal policy is supposed to remain tight.That is why private capital matters.Government does not necessarily need to finance every new megawatt itself. But it does need to create conditions under which private investors can finance generation, transmission and related infrastructure at reasonable risk.This brings the new programme back to its most important phrase:private-sector-led growth. <h2>What does this mean for a Zambian business?</h2>This is ultimately where the IMF programme becomes real.For a manufacturer, it means whether electricity is reliable enough to operate.For an importer, it means whether the kwacha and foreign-exchange market remain sufficiently stable to price inventory.For a farmer, it means whether roads, storage, irrigation and markets allow production to become a profitable business.For a mining supplier, it means whether the expansion of copper production creates opportunities for local companies.For a household, it means whether economic growth eventually produces jobs and higher real incomes.Macroeconomic stability matters because it changes these conditions.But stability by itself does not guarantee them. <h2>The danger is becoming good at stabilisation</h2>There is a subtle risk in the new programme.Zambia could successfully maintain fiscal discipline, meet IMF targets and preserve macroeconomic stability — yet fail to change the underlying structure of the economy.That would produce a stable version of the same economy.And that is not enough.The previous programme was successful to the extent that it helped move Zambia away from the immediate consequences of default and macroeconomic instability.The next programme will be judged against a different standard.Did Zambia become more productive?Did private investment increase?Did exports diversify?Did electricity reliability improve?Did manufacturing expand?Did agricultural productivity rise?Did formal and productive employment grow?Did household incomes increase?Those are much harder questions than whether the fiscal numbers met an IMF performance criterion. <h2>The US$1.47 billion is therefore not the main story</h2>The financing matters.The IMF programme matters.Debt sustainability matters.But the bigger story is that Zambia is moving from an era of stabilisation to an era of execution.The country has made genuine progress in rebuilding macroeconomic credibility. The challenge now is avoiding the two extremes: returning to the fiscal excesses of the past, or pursuing such tight consolidation that investment and growth are weakened.The solution lies in the quality of the adjustment.Raise more revenue.Spend better.Control fiscal risks.Protect productive investment.Crowd in private capital.And use mining and agriculture as platforms for broader economic diversification rather than as ends in themselves.That is the economic bargain embedded in the new IMF programme.Zambia has spent the past four years repairing the balance sheet. The next four will determine whether that repair becomes a foundation for growth — or simply a more stable way of managing the same structural weaknesses.

Zambia’s New IMF Deal: Stability Has Been Bought. Can Growth Now Be Delivered?

Deep beneath the city stood a machine that had been running for as long as anyone could remember.They called it The Immortal Engine.Nobody knew exactly when it had been built. Some said it was designed by economists. Others said engineers had merely inherited it from generations before them.But everyone knew one thing:The engine could never stop.Inside it lived millions of people.Some worked in the food chambers. Others operated transport systems, factories, banks and shops. There were farmers, traders, teachers, miners and mechanics.Every morning, the engine moved.And every morning, the engineers watched its gauges.One gauge mattered more than almost any other.It was called INFLATION.Inflation did not tell them whether the engine was moving.The engine was always moving.Instead, it told them how quickly the cost of living inside the engine was changing.When inflation was rising rapidly, the engineers knew something was happening inside the machine.Perhaps it was overheating.Perhaps fuel was becoming expensive.Perhaps too much pressure was building in one part of the system.Or perhaps several problems were happening at once.The engineers therefore had different departments.And, importantly, they did not all control the same parts of the machine. <h2>The Department of Monetary Controls</h2>On the eastern side of the engine was a large control room.Above the door was written:BANK OF ZAMBIA — MONETARY CONTROLInside sat the monetary engineers.Their most important instrument was a giant lever called the POLICY RATE.The lever controlled the cost of borrowing across the engine.When the engineers raised the lever, borrowing generally became more expensive.The idea was simple:If people and businesses were borrowing and spending too aggressively, raising the rate could help slow demand.It was like pressing the engine's brake.But brakes were not meant to be pressed forever.If the engine was already slowing too much, keeping the brake down could create another problem.Factories could slow.Businesses could postpone investment.Consumers could reduce spending.Economic activity could weaken.So the monetary engineers constantly asked:Is the engine moving too fast, or are we already slowing it too much? <h2>The Energy Department</h2>On the western side of the machine was another control room.This one belonged to the Energy Regulation Engineers.They controlled something very different.They did not control the brake.They controlled the fuel system.Fuel was the energy that kept the engine moving.But fuel had a cost.When the price of fuel increased, almost everything connected to the engine could feel it.Trucks needed fuel.Buses needed fuel.Farmers needed fuel.Factories needed fuel.Generators needed fuel.And when transportation became more expensive, the cost could eventually find its way into the price of food and other goods.The engineers knew this.But they also had another problem.If the engine needed fuel, someone had to pay the cost of producing and supplying that fuel.So the Energy Department had to adjust the fuel gauge when the underlying cost of fuel changed. <h2>Then came September 30</h2>One morning, two messages arrived at the central command room.The first came from the Monetary Control Department."Reduce the policy rate."The engineers had decided that the monetary brake could be eased.The engine did not need as much braking pressure as before.Some observers outside the engine immediately became confused."Why are they stepping off the brake?"But the monetary engineers had their own gauges.Inflation had been declining.The economic environment had changed.And they were trying to balance the need to contain inflation with the need to avoid unnecessarily restricting economic activity.So they released some pressure from the brake. Then another message arrived.This one came from the Energy Department."Increase the price of fuel."Now everyone was confused.One department was easing the brake.Another was making fuel more expensive.Was the engine malfunctioning?Not necessarily.The two engineers were controlling different parts of the machine.The Monetary Department was concerned with the speed and pressure of demand.The Energy Department was dealing with the cost of the energy required to keep the machine running.And this is where understanding inflation becomes important. <h1>The Engine Cannot Stop</h1>Imagine you are sitting inside the Immortal Engine.The machine is moving.If it moves too quickly, things start to go wrong.The engine becomes hot.Workers become uncomfortable.Components wear out faster.The engineers may need to apply the brakes.In an economy, one way this can show up is through rapidly rising prices.That is one reason central banks can raise interest rates.But imagine the opposite.The engine is moving too slowly.Factories are producing less.Businesses are investing less.People are spending less.Workers are losing income.The engineers may decide that keeping the brake pressed is no longer appropriate.So they ease it.That is broadly what a policy-rate cut is trying to do.But now imagine that, at exactly the same time, the fuel itself becomes more expensive.The engine still has to run.The trucks still have to move.The food still has to be transported.The generators still have to operate.So even though the monetary engineers have eased the brake, the higher fuel cost can push up costs elsewhere in the machine. <h1>Cooling and Heating</h1>The most important lesson inside the Immortal Engine was this:The economy can be moving while inflation is falling.People sometimes imagine that falling inflation means prices are falling.They aren't necessarily.If inflation falls from 10% to 6%, prices are generally still rising.They are simply rising more slowly.Think of the engine's temperature.Suppose yesterday the engine was heating at a rate of 10 degrees per hour.Today it is heating at 6 degrees per hour.The engine is still getting hotter.It is just getting hotter more slowly.That is similar to what happens when the inflation rate falls while prices continue to increase.The engineers therefore have to watch both the temperature and the rate at which the temperature is changing. <h2>But Fuel Can Change the Temperature</h2>The fuel department creates another complication.If fuel becomes more expensive, transportation and production costs can rise.A farmer may pay more to move fertiliser.A trucker may pay more to transport maize.A bus operator may face higher operating costs.A manufacturer may pay more to move raw materials.Eventually, some of these costs can be passed on to consumers.The engine begins generating more heat.The monetary engineers see this on their gauges.But they cannot simply respond to every increase in fuel prices by slamming on the monetary brake.That could create a different problem.If the underlying economy is already slowing, excessive braking could make the engine struggle.So the engineers have to distinguish between demand-driven inflation and cost pressures. <h1>The Great Balancing Act</h1>This is why the Immortal Engine has so many engineers.One person cannot control everything.The monetary engineers control the brake.The energy engineers control the fuel system.Other engineers work on electricity, food production, exchange rates, government spending, taxes, trade and financial stability.All of them are trying to keep the same machine running.And sometimes their actions can appear contradictory.One engineer says:"Ease the brake."Another says:"Fuel is more expensive."Both can be true.Because the economy is not controlled by one lever.It is a machine with thousands of interconnected parts. <h1>And The Engine Keeps Moving</h1>Inside the Immortal Engine, the people eventually learned something important.Their goal was not to stop the machine.Stopping it would be disastrous.The goal was to keep it moving at a pace that could be sustained.Not too fast.Not too slow.Not too hot.Not too cold.The engineers would constantly adjust the controls.Sometimes they would apply the brake.Sometimes they would release it.Sometimes they would have to pay more for fuel.Sometimes fuel costs would fall.And sometimes an adjustment in one department would create consequences somewhere else.The machine would never be perfectly still.Because an economy that is functioning is always moving.The real challenge is keeping that movement sustainable.And somewhere deep inside the Immortal Engine, another gauge began to flash.INFLATION: 6.1%The engineers looked at it.The engine was still moving.But for the moment, it was not moving as violently as before.Then another alarm appeared:FUEL COST: RISINGThe engineers looked at each other.They knew their work was far from finished.Because the Immortal Engine never sleeps.And neither do its engineers.

The Immortal Engine

<h3>The pump-price increase will hit transport first, food next — but the bigger inflation risk may be the kwacha</h3>Zambia’s latest fuel-price adjustment was hard to miss.In September, petrol rose from about K25.29 to K31.46 per litre, while diesel increased from K26.86 to K33.27. That is roughly a 24% increase in pump prices in a single month.The immediate question for households and businesses is straightforward: how much of that increase will eventually show up in the prices of everything else?To get a sense of the answer, we analysed 15 years of Zambian data, covering fuel prices, inflation, food prices, the exchange rate, international oil prices and trade activity between 2011 and 2026.The results suggest that fuel does matter — but its effect is slower and smaller than the size of the pump-price increase might suggest. <h2>Fuel does push inflation higher</h2>Our estimates indicate that a 1% increase in pump prices is associated with roughly a 0.07% increase in the overall price level within a year.Applied to September’s roughly 24% increase, this translates into an estimated 1.5–1.7 percentage-point addition to annual inflation at the peak, assuming other factors remain unchanged.That is meaningful.With inflation at 6.1% in September, a fuel shock of this size could, on its own, push inflation towards the upper end of the Bank of Zambia’s 6–8% target range.But it is important to put the estimate in perspective. Fuel is only one part of the inflation story. <h2>The shock takes months to work through the economy</h2>The impact of a fuel increase does not arrive everywhere at the same time.First come transport costs.Within the first few weeks, higher petrol and diesel costs begin feeding into bus fares, taxi charges and freight costs. Transport is the fastest channel through which the fuel shock appears in our analysis.Food comes later.Diesel is an input into the movement of maize, mealie meal, vegetables and other goods. It also affects milling, distribution and other parts of the supply chain.As a result, food prices respond more slowly, with the effect building over several months.Our estimates suggest that the overall inflation impact is largest at around five months after the initial fuel-price increase.For the September adjustment, that points to early 2027 as a period when the fuel-related inflation pressure could be at its strongest. <h2>Why households may feel it most at the market</h2>For many households, the most important question is not what happens to the headline inflation rate. It is what happens to the price of food.Food accounts for a significant share of household spending, making this channel particularly important.Using national average prices from ZamStats, our estimates suggest that a fuel increase of September’s magnitude could eventually add roughly K30–40 to the price of a 25 kg bag of roller mealie meal, from a current price of around K182.But this is one of the areas where caution is particularly important.Fuel is not the main determinant of the price of mealie meal. Maize availability, rainfall, harvests, stocks and other supply conditions can have much larger effects.In a good harvest year, the fuel effect could be relatively small compared with favourable maize supply.In a poor harvest year, however, higher fuel costs could add another layer of pressure. <h2>When fuel prices fall, prices may not follow</h2>There is another feature of the data that matters for consumers.Fuel-price increases and decreases do not appear to have perfectly symmetrical effects.When fuel prices rise, the resulting increase in costs tends to persist. When fuel prices subsequently fall, other prices do not necessarily fall by the same amount or at the same speed.Transport operators, traders and retailers may reduce their costs, but prices across the economy can remain sticky.This means a future reduction in pump prices should not automatically be interpreted as a reversal of the September increase in the cost of living. <h2>The kwacha may be the bigger inflation story</h2>Perhaps the most important finding from the analysis is that fuel prices are not the dominant driver of inflation in Zambia.Our estimates suggest that changes in pump prices explain only around 2–3% of movements in inflation.The exchange rate accounts for a considerably larger share, at roughly 15–23%.A 1% depreciation of the kwacha against the US dollar is estimated to raise consumer prices by about 0.3% over a year — roughly four times the estimated effect of a 1% increase in fuel prices.Food-price shocks, particularly those linked to agricultural conditions, account for much of the remaining variation.This distinction matters because the fuel price and exchange rate are closely connected.Zambia imports its fuel and pays for it in foreign currency. When the kwacha weakens, the local-currency cost of importing fuel rises, putting pressure on pump prices.That means an economy can face a double shock: a weaker kwacha raises the cost of imported goods while simultaneously making fuel more expensive.Historical episodes illustrate the point. The sharp inflation increases of 2015–16 and 2020–22 coincided with substantial exchange-rate pressures, alongside other domestic and external shocks. <h2>There is also a growth cost</h2>The effect of higher fuel prices is not limited to inflation.Businesses face higher transportation, production and distribution costs, while households have less money available for other spending.Because Zambia does not publish monthly GDP figures, we constructed an economic activity indicator using variables including imports of production and consumer goods, copper prices and borrowing costs.The indicator suggests that fuel-price increases are followed by a slowdown in economic activity over the subsequent two to seven months.Firms may reduce purchases of inputs, while households cut back on discretionary spending.The estimated effect is subject to considerable uncertainty, so it is better interpreted as evidence of a direction of impact rather than a precise forecast of how much GDP will fall. <h2>What the September increase means</h2>For households, the sequence is likely to be familiar: transport costs first, followed by broader price pressure — particularly food — over the following months.For businesses, sectors that depend heavily on logistics, including agriculture, retail, distribution and construction, are likely to face the pressure early.For policymakers, the fuel increase creates a meaningful inflation shock, but the wider picture is more complicated.The bigger risk is not necessarily fuel prices in isolation. It is fuel prices rising at the same time as the kwacha weakens and food supply comes under pressure.That combination would give inflation several channels through which to accelerate.The September fuel adjustment therefore tells only part of the story.The bigger question for Zambia’s cost of living in the months ahead may be what happens to the kwacha, food supply and the wider economy alongside the fuel price.Note: These are model-based estimates using historical Zambian data from 2011–2026. They are not forecasts of actual future prices. The estimates assume other factors remain unchanged and carry uncertainty, particularly for individual food products.

What September’s Fuel Hike Means for Zambia’s Economy

Petrol rises to K31.46, diesel to K33.27 per litreFuel is getting noticeably more expensive from tonight.The Energy Regulation Board (ERB) has raised petroleum prices for October, with petrol increasing by K6.17 per litre and diesel by K6.41.The new prices take effect at midnight on 30 September 2026.Petrol will now cost K31.46 per litre, up from K25.29, while diesel rises to K33.27, from K26.86.Kerosene increases from K27.02 to K29.76, while Jet A-1 rises from K28.71 to K31.85.<h3>So, what happened?</h3>The ERB points to three things: higher international oil prices, a weaker kwacha and the return of excise duty.During the review period, the average international price of petrol increased from US$104.94 to US$121.58 per barrel. Diesel also rose, from US$150.92 to US$160.88.At the same time, the kwacha weakened against the US dollar, moving from K19.28 to K19.76 per dollar.Together, those movements increased the cost of petroleum imports.But there is another part of the story.<h3>The tax relief is ending</h3>From April to September, Government suspended excise duty on petroleum products and zero-rated VAT as part of measures to cushion consumers from higher fuel prices.That helped keep pump prices lower.Now the temporary relief period has ended.Government has reinstated excise duty from October, although the ERB says VAT will remain zero-rated until 1 December 2026.So October's increase isn't simply about what happened to oil prices internationally. The return of excise duty is also now showing up at the pump.<h3>What does it mean for motorists?</h3>Quite simply, filling up will cost more.A 50-litre petrol tank will now cost about K1,573, compared with K1,264.50 under the September price.For diesel, 50 litres will cost about K1,663.50, compared with K1,343 previously.That's roughly K309 more for petrol and K321 more for diesel for a 50-litre fill-up.And fuel prices rarely stay confined to the filling station.Diesel is an important input for transport, agriculture, mining, construction and logistics. Higher fuel costs can therefore increase the cost of moving people and goods, with some of that pressure potentially feeding into prices elsewhere in the economy.The ERB says its price-smoothing measures helped moderate the increase and that, despite the adjustment, Zambia's fuel prices remain competitive within the region.For now, however, the immediate reality is simple:From tonight, filling up costs more.Source: Energy Regulation Board, October 2026 Petroleum Pump Price Review, 30 September 2026.

Fuel prices jump as ERB raises pump prices

The Bank of Zambia has cut its key policy rate by 250 basis points to 10.75%, delivering its fourth consecutive rate cut as inflation continues to ease.The decision came on Wednesday, September 30, against the backdrop of a sustained disinflationary trend that has been underway since early 2025.And this was a move we were watching closely at Katondo Street Journal.In yesterday’s analysis, “What Will the Bank of Zambia Do With the Policy Rate?”, we examined the case for another cut, pointing to falling inflation and the changing monetary policy environment.<a href="https://www.katondostreet.com/article/what-will-the-bank-of-zambia-do-with-the-policy-rate?utm_source=chatgpt.com" rel="noopener noreferrer" target="_blank">Read yesterday’s KSJ analysis: What Will the Bank of Zambia Do With the Policy Rate?</a><h3>Inflation gave the Bank room to move</h3>Annual inflation eased to 6.1% in September, down from 6.2% in August. That is the lowest annual inflation rate since February 2018 and places inflation close to the lower end of the Bank of Zambia’s 6–8% target range.The decline in inflation has been supported by several factors, including the suspension of fuel taxes, zero-rating of value-added tax and a relatively resilient Kwacha.The result is a very different inflation environment from the one Zambia faced when monetary policy was considerably tighter.<h3>What does a 10.75% policy rate mean?</h3>The policy rate is not the interest rate consumers see directly on their loans. Instead, it is one of the key signals used by the central bank to influence financial conditions across the economy.A lower policy rate can eventually translate into lower borrowing costs if commercial banks adjust their lending rates.For businesses, that could mean cheaper financing for working capital and investment. For households, it could affect the cost of new borrowing and, depending on the type of loan, existing variable-rate credit.But the transmission will not necessarily be immediate. Banks also consider their own funding costs, liquidity and credit risks when setting lending rates.<h3>The bigger question now</h3>With inflation at 6.1%, the focus shifts from whether inflation is falling to how the Bank manages monetary policy with inflation now near the bottom of its target range.The latest cut therefore marks another step in Zambia's transition from an environment of high inflation and tight monetary conditions towards one where policymakers have greater room to support economic activity.For businesses and consumers, the question now is whether the reduction in the policy rate will begin to show up more clearly in the cost of credit.For KSJ, Wednesday's decision also provides a useful reminder: watching the inflation data can tell us a lot about where monetary policy may be heading.

Bank of Zambia Cuts Policy Rate to 10.75% — As KSJ Predicted

Zambia's latest inflation number looks encouraging.Annual inflation fell from 6.2 percent in August to 6.1 percent in September, the lowest level since February 2018. Food inflation also eased, from 6.0 percent to 5.8 percent, while non-food inflation remained at 6.6 percent.But there is a danger in reading the 6.1 percent figure as simply meaning that life is becoming cheaper.It isn't.What is happening is more subtle: the rate at which prices are rising has slowed. The prices themselves remain elevated. <h2>Think of inflation as the speed of a car</h2>The easiest way to understand this is to think about a car.If a car is moving at 80 kilometres per hour and the driver reduces speed to 70, the car is still moving forward. It has not started going backwards.Inflation works in much the same way.When inflation falls from 6.2 percent to 6.1 percent, prices are still moving upwards. They are simply increasing at a slightly slower pace.So Zambia has not entered a period of falling prices.It has entered a period where the increase in prices is moderating.That distinction is particularly important for households because the price increases of previous years are already built into the prices people face today. <h2>Zambia's inflation story is increasingly a food story</h2>The September numbers tell us something important about where the moderation is coming from.Food inflation fell to 5.8 percent from 6.0 percent. ZamStats attributes the movement mainly to price changes in cereals, vegetables, groundnuts and dried beans.That matters enormously in Zambia.For a household, food is not an occasional purchase. It is a recurring and unavoidable expense.So even a relatively small moderation in food-price increases can help ease pressure on household budgets.But we should also look at what has not changed.Non-food inflation remained at 6.6 percent.That tells us that the moderation is not yet broad-based across the entire consumer basket. Some of the pressure outside food is still present. ZamStats points to movements including passenger air transport and vehicle prices among the factors affecting non-food inflation. <h2>The monthly number gives us another warning</h2>There is another detail that deserves attention.While annual inflation fell, monthly inflation increased from 0.2 percent in August to 0.4 percent in September.This is important because annual inflation looks backwards over twelve months, while monthly inflation gives us a more immediate sense of what happened to prices during the latest month.So we have an interesting combination:Year-on-year inflation is coming down, but prices still increased during September, and they increased faster than they did in August.That is another reason not to interpret 6.1 percent as "prices are falling."They are not. <h2>Why households may not feel the improvement</h2>This is where the official statistics and household experience can appear to diverge.Suppose a family was spending K2,000 a month on a particular basket of essentials.If prices rise, that basket might eventually cost K2,100, then K2,200.If inflation subsequently slows, the basket does not return to K2,000.It may simply move from K2,200 to K2,250 instead of K2,200 to K2,300.For the economist, that is an improvement in inflation.For the household, however, the K2,250 still has to come out of the monthly budget.That is why lower inflation and a high cost of living can exist at the same time. <h2>Zambia also has a currency story</h2>The exchange rate matters considerably for Zambia because the country imports many of the goods, inputs and fuels that eventually feed into domestic prices.A more stable currency can reduce the pressure coming from imported inflation by making imported goods and inputs relatively less expensive in kwacha terms.Recent commentary on Zambia's inflation has pointed to a relatively resilient kwacha as one factor helping to contain price pressures.But this is not something households should take for granted.A renewed weakening of the currency, combined with higher international commodity or fuel prices, could quickly feed into domestic costs.That is particularly relevant because Zambia's inflation outlook remains exposed to global oil-price developments. The IMF has warned that higher global oil prices and geopolitical tensions could put renewed pressure on inflation and the exchange rate. <h2>Then there is fuel</h2>This may be one of the most important issues going forward.Government has been using temporary tax relief on fuel — including the suspension of excise duty and zero-rating of VAT on petrol and diesel — as part of efforts to cushion consumers and businesses from high fuel costs. The current extension runs through September 30, 2026.That matters because fuel is not just a line item on the household budget.Fuel affects transport, distribution, agriculture, manufacturing and ultimately the price of goods in shops.So as we move beyond September, one of the questions for the inflation outlook is how fuel prices will behave once these temporary measures expire.The September inflation number therefore needs to be viewed as a snapshot, not the end of the story. <h2>The real test is purchasing power</h2>Ultimately, the most useful way to judge the cost-of-living situation is not simply to ask whether inflation is falling.We should ask:Are Zambians' incomes growing faster than the prices of the things they need?If inflation falls from 10 percent to 6 percent but wages and household incomes are barely changing, families can still feel financially squeezed.Conversely, if incomes grow faster than prices, households can experience an improvement in purchasing power.That is why the conversation about inflation should move beyond the headline number.6.1 percent is good information. But it is not the whole household story.The encouraging part is that Zambia's annual inflation rate has been trending down for several months, reaching its lowest level since February 2018.The caution is that monthly prices are still rising, non-food inflation remains at 6.6 percent, and important risks remain around fuel, the exchange rate and external commodity prices.So the most accurate description of the current situation is perhaps this:Zambia is seeing slower price increases, not lower prices.And for households, the difference between those two statements is enormous.

Zambia's Inflation Is Slowing. But the Cost-of-Living Story Is More Complicated

A flat tyre on the way to work. A dead battery in the middle of town. Running out of fuel when you least expect it.For many motorists, the problem is not only the breakdown itself. It is knowing who to call, where to find help and how long that help will take to arrive.That is the problem a Zambian startup, HurryApp, is looking to address with a digital roadside assistance platform designed to connect motorists with help when they need it.Founded by Warren Male, HurryApp is being developed around a simple idea: make roadside assistance easier to access through a single platform.The service is intended to connect motorists with assistance for some of the most common problems experienced on the road, including flat tyres, dead batteries, fuel shortages and locked-in vehicle keys.Instead of relying entirely on personal contacts or searching for a mechanic after a breakdown has already happened, the platform aims to give motorists a more direct way of requesting assistance.<h3>More than roadside assistance</h3>HurryApp is also looking beyond emergency call-outs.The startup says its HurryApp Store will provide access to automotive essentials and roadside products, giving motorists a place to find items they may need for their vehicles and emergencies.The platform is also being developed with an SOS feature, intended to help users quickly reach emergency assistance when situations become more serious.This adds another dimension to the platform: rather than focusing only on vehicle repairs, HurryApp is positioning itself around the broader problem of getting assistance when something goes wrong on the road.<h3>Building for Zambia</h3>Roadside assistance remains an area where much of the process can be informal, with motorists often depending on mechanics, friends, garages or individual service providers they already know.For a driver stranded somewhere unfamiliar, however, that network may not always be available.HurryApp's proposition is to bring some structure to that process by creating a digital link between motorists and roadside service providers.The broader opportunity is significant as Zambia's vehicle population continues to support demand for maintenance, repairs, automotive products and emergency services, particularly in urban areas such as Lusaka.For startups operating in this space, the challenge will ultimately be less about having an app and more about building a dependable service network behind it.That means having the right providers available, responding quickly, maintaining service quality and giving motorists confidence that when they request help, someone will actually show up.<h3>From an idea to a service</h3>For HurryApp, the next stage will be turning the platform into something motorists can routinely rely on.The company is inviting motorists to get familiar with the platform as it prepares to expand its roadside assistance offering in Zambia.The ambition is straightforward: when a vehicle lets you down, finding help should not become another problem.HurryApp is founded by Warren Male.📲 Motorists can learn more and access the app through the company's website.🌐 <a href="https://www.hurryappcarrier.com?utm_source=chatgpt.com" rel="noopener noreferrer" target="_blank">HurryApp website</a>#HurryApp #RoadsideAssistance #Zambia #Lusaka #Mobility #Automotive #Innovation #ZambianStartups

HurryApp Wants to Take the Stress Out of Roadside Emergencies

No number in the Zambian economy is watched more closely, or understood less carefully, than the kwacha-dollar rate. It is quoted in kwacha per dollar, which means the line going up is the kwacha going down — a source of endless confusion in headlines that should know better. [[chart:kwacha-dollar]]The currency's path over the period above splits into three distinct regimes, each with its own driver: the commodity cycle, the debt restructuring timetable, and the seasonal pattern of import demand that tightens the market in the same months every year.<h3>Why it matters beyond the traders</h3>Roughly a third of the Zambian consumer basket is imported or priced off an imported input. Fuel is the obvious channel, but fertiliser, pharmaceuticals and most manufactured goods follow the same arithmetic. A weaker kwacha is an inflation forecast with a two-to-three month lag.Every chart in this piece is drawn from the KSJ economic database and refreshes as new monthly data is published.

The exchange rate is the single price that touches every other price in Zambia. Here is where it has been.

The Kwacha's Year: Five Charts on a Currency Under Pressure

A decision made by a central bank thousands of kilometres away can eventually show up in the price of imports, the value of a currency and the cost of borrowing in Zambia.Interest rates are usually presented as domestic policy decisions.The US Federal Reserve changes its policy rate to influence the American economy. The European Central Bank does the same for the euro area. But in an increasingly interconnected financial system, these decisions rarely remain within their own borders.For emerging markets, changes in global interest rates can have very real consequences.<h3>It starts with investors</h3>International investors are constantly comparing returns.When interest rates in advanced economies rise, government bonds and other assets in those markets can become more attractive relative to riskier emerging-market investments.Some investors may therefore reduce their exposure to emerging markets and move funds into assets perceived as safer or offering better risk-adjusted returns.The reverse can happen when global rates decline.Lower returns in advanced economies can push investors to search for yield in emerging and frontier markets.These movements can influence the availability and cost of foreign capital.<h3>The currency channel</h3>One of the most visible effects can appear in foreign-exchange markets.If international investors reduce their holdings of local assets, demand for the local currency can weaken. Depreciation can follow.For an economy that imports fuel, machinery, medicines, food or industrial inputs, this matters.A weaker currency means that the same dollar-priced import costs more in local currency.That can feed into domestic inflation.Central banks may then face a difficult balancing act. Cutting interest rates could support economic activity, but doing so while the currency and inflation are under pressure may create additional risks.<h3>Governments feel it too</h3>The impact does not stop with private investors.Emerging-market governments often rely on domestic and international borrowing to finance public expenditure and investment.When global interest rates rise, international borrowing can become more expensive. Investors may also demand higher yields to compensate for the increased opportunity cost and perceived risk of holding emerging-market debt.Foreign-currency debt creates another vulnerability.If the local currency depreciates against the dollar, the domestic-currency cost of servicing dollar-denominated debt increases even if the amount owed in dollars has not changed.This can place additional pressure on government budgets.<h3>Why Zambia is exposed</h3>Zambia provides a useful illustration of these transmission channels.The country is integrated into global markets through trade, investment and external financing. Copper exports generate foreign exchange, while the economy also depends on imported fuel, machinery and other goods.Global financial conditions therefore matter.A change in the attractiveness of US or European assets can influence international investor appetite for emerging and frontier markets. Changes in commodity prices can simultaneously affect Zambia's export earnings and foreign-exchange position.The result is that the impact of a global interest-rate shift is not necessarily straightforward.A period of higher global rates may create pressure through financing costs and capital flows, while strong copper prices could provide an offset through higher export receipts.Domestic policy and economic fundamentals matter as well.<h3>Not every emerging market experiences the same shock</h3>The phrase "emerging markets" can sometimes make very different economies sound identical.They are not.A country with substantial foreign-exchange reserves, strong export earnings and relatively manageable external debt may respond differently to a global rate increase than a country with large external financing needs and weak reserves.The structure of the economy matters too.Commodity exporters, for example, may benefit from rising prices for their major exports even as tighter global financial conditions create pressure elsewhere.This is why global interest rates should be understood as one part of a larger transmission mechanism rather than a single cause of economic outcomes.<h3>From Washington to Lusaka</h3>The important point is that monetary policy has become increasingly global in its consequences.A rate decision in Washington can influence international capital flows.Capital flows can affect exchange rates.Exchange-rate movements can influence import prices and inflation.Global borrowing costs can affect government financing.And these pressures can eventually feed into decisions made by businesses, households and policymakers in countries far from the original decision.The chain is not always immediate, and it does not operate in exactly the same way everywhere.But it helps explain why emerging-market economies pay close attention to decisions made by the world's major central banks.For countries such as Zambia, understanding this connection is increasingly important.The price of money is globalising, even when economic policy remains largely national.

How Shifts in Global Interest Rates Reach Emerging Markets. Placeholder summary for the World section. Replace this text with a real story or delete the article from the admin dashboard.

How Shifts in Global Interest Rates Reach Emerging Markets

When the price of fuel rises, the pain is immediate. It appears at the filling station, in transport fares, in the cost of moving goods and eventually in the prices consumers pay for food and other essentials. That is why the Zambian Government's decision to suspend excise duty and zero-rate Value Added Tax (VAT) on petrol and diesel imports made economic sense when it was introduced in April 2026. With global oil prices rising amid the crisis in the Middle East, the measure was intended to cushion households and businesses from another fuel-price shock.But there is another side to the policy that is less visible to the public. Someone still has to pay for the relief. In this case, that someone is the Treasury.The Government initially introduced the fuel tax relief for three months, from April to June 2026, before extending it for another three months from July 1 to September 30. When the waiver was first introduced, Government estimated that the initial three-month intervention would cost approximately US$200 million in foregone revenue. That figure provides a useful benchmark for understanding the scale of the policy.If the original US$200 million estimate is spread evenly across the three months, the implied fiscal cost is approximately US$66.7 million per month. At that rate, the six-month period from April through September could represent roughly US$400 million in foregone revenue. By September 7, the implied cumulative cost would be around US$349 million. At an exchange rate of approximately K19 per US dollar, that translates into roughly K6.6 billion in foregone tax revenue. By the end of September, the figure could approach K7.6 billion.These figures should not be mistaken for audited Treasury outturns. They are a simple extrapolation from Government's original US$200 million estimate, and the actual cost will depend on fuel import volumes, international prices, exchange rates, consumption and the resulting tax base. Nevertheless, even as an indicative calculation, the numbers are large enough to change the nature of the debate. This is no longer simply a question of whether motorists should pay more or less for a litre of petrol or diesel. It is a question of what Zambia is willing to sacrifice from its public finances to keep fuel prices lower.There is a legitimate economic case for the waiver. Fuel is not an ordinary consumer product. Petrol and diesel are inputs into almost every part of the economy. Trucks require diesel to move goods. Farmers depend on fuel to operate machinery and transport produce. Businesses incur fuel costs in their logistics operations, while public transport operators face fuel costs that influence fares. When fuel becomes expensive, the shock travels through the economy. Reducing fuel taxes can therefore provide benefits beyond the person filling a private vehicle. It can reduce transport and logistics costs, moderate inflationary pressures and give businesses some breathing room.For Government, the argument is straightforward: sacrificing tax revenue today may prevent a much larger economic shock tomorrow. That is a legitimate economic policy argument. But it does not answer another important question: who actually benefits from the relief?A fuel tax waiver is a broad instrument. A household that consumes 50 litres a month receives some benefit, while a household consuming 500 litres receives considerably more. A small trader who occasionally purchases fuel benefits, but a large logistics company operating a fleet of trucks benefits substantially more. The policy therefore does not necessarily distribute the fiscal sacrifice according to economic need.This matters because Government is effectively using public revenue to reduce the cost of a commodity consumed disproportionately by those who consume more of it. An alternative approach could have been to use part of the fiscal space for more targeted interventions, such as cash transfers, public transport support, agricultural production or assistance to particularly vulnerable households and productive sectors. That does not automatically mean targeted support would have been better than the fuel waiver. It means the alternatives should be compared against the cost of the current policy.The political attraction of a fuel waiver is easy to understand. The benefit is visible. Consumers see the price at the pump. The fiscal cost is much less visible. There is no display at a filling station showing how much tax revenue Government has surrendered that month. That cost appears somewhere else, in the public finances, where it competes with spending on health, education, infrastructure, social protection and debt obligations.This creates a fundamental challenge for fiscal policy. If Government collects billions of kwacha less in VAT and excise duties, something else eventually has to adjust. It could be expenditure, borrowing, the fiscal deficit or pressure to increase other sources of revenue. This is particularly important for Zambia because the country is simultaneously trying to strengthen domestic revenue mobilisation and maintain fiscal consolidation.The International Monetary Fund has already highlighted the suspension of fuel VAT and excise duties as one of the factors contributing to weaker tax collection and a deterioration in Zambia's projected fiscal position. This creates an uncomfortable policy tension. Zambia needs stronger domestic revenue mobilisation, yet at the same time it is deliberately giving up a significant source of domestic revenue.There may be good economic reasons for doing this temporarily. The problem begins when temporary emergency relief becomes difficult to withdraw.The real test, therefore, should not simply be whether the fuel waiver reduced prices. It did. The more important question is whether the economic benefits are worth the revenue Zambia is giving up.Government should be able to estimate how much consumers have saved as a result of the policy, how much businesses have saved, how much inflation was avoided and how much of the benefit reached lower-income households. That would allow policymakers to answer a much more important question than the headline cost: what did Zambia get for the billions of kwacha it sacrificed?If the country gave up K7 billion but prevented a major inflationary shock, protected businesses, reduced transport costs and preserved household purchasing power, the policy may prove to have been worthwhile. If much of the benefit accrued to higher fuel consumers while the fiscal position deteriorated, then the same resources might have generated greater economic and social returns elsewhere.Without that analysis, Zambia knows the cost of the intervention but has only a partial picture of its return.The September 30 expiry of the current waiver should therefore be more than another administrative deadline. It should be an opportunity for Government to publish a proper assessment of the intervention before deciding whether to extend it again. How much revenue was actually forgone? How much did motorists save? What happened to transport costs? What happened to inflation? How much did businesses save? And perhaps most importantly, who benefited?There is also a need for greater transparency around the counterfactual. Zambians should know what the pump price would have been if VAT and excise duties had remained in place. Only then can citizens properly understand the size of the relief they are receiving and the fiscal price being paid on their behalf.The temptation in public policy is to celebrate the visible benefit while ignoring the invisible cost. But tax policy does not make costs disappear. A tax waiver simply transfers the cost from the consumer at the pump to Government's balance sheet. And ultimately, Government's balance sheet belongs to the public.The fuel waiver may have been the right decision when global oil prices were threatening another inflationary shock. But a policy can be justified when it is introduced and still require reassessment several months later. Circumstances change, fiscal pressures change and the cost of continuing an emergency intervention becomes increasingly important.Based on Government's original estimate of US$200 million for the first three months, Zambia could be approaching US$350 million in foregone revenue by early September, with the six-month cost potentially reaching approximately US$400 million by the end of September. At around K19 to the dollar, that is a potential fiscal sacrifice of more than K7 billion.That is too much money for the country to evaluate the policy simply by asking whether fuel is cheaper.The harder question is the one that matters: was the relief worth what Zambia gave up to provide it?Before another extension is considered, Government should give the public the numbers.Because cheap fuel at the pump is not free.Someone is paying the bill.

Zambia’s Fuel Tax Holiday Is Not Free — Someone Is Paying the Bill

Zambia’s Treasury released K21.1 billion in July 2026 for social support, public-service wages, debt obligations, government operations and capital projects, according to a statement attributed to Secretary to the Treasury Felix Nkulukusa. The July release opened the second half of the 2026 financial year and brought cumulative Treasury releases from January to July to K152.05 billion. July therefore accounted for about 13.9 per cent of the amount released during the first seven months. Nkulukusa said the allocations were intended to translate public resources into services and tangible benefits. The figures describe funds released by the Treasury, however, and do not by themselves show how quickly receiving institutions spent the money or what outputs were delivered. How the K21.1 billion was allocatedTransfers, subsidies and social benefits: K6.3 billion, or 29.9 per cent of the July total.Public-service wage bill and related obligations: K5.9 billion, or 28.0 per cent.Debt service and domestic arrears: K4.3 billion, or 20.4 per cent.Government programmes and general operations: K3.4 billion, or 16.1 per cent.Capital expenditure: K1.2 billion, or 5.7 per cent.Transfers and the wage bill together absorbed K12.2 billion, or almost 58 per cent of the July total. Debt service and arrears accounted for roughly one-fifth, while capital expenditure represented less than 6 per cent. Percentages may not add precisely to 100 because of rounding. Food security and farmer supportThe Food Reserve Agency received K2.7 billion, making it the largest specifically identified beneficiary under the July transfers. The Farmer Input Support Programme received K660 million, taking cumulative FISP releases for 2026 to K6.4 billion. Those allocations place food security and agricultural support near the centre of the month’s spending priorities. Their practical effect will depend on timely crop purchases, farmer payments, input procurement and transparent beneficiary management. The Zambian Economist has previously examined why speed and transparency are central to FRA crop marketing. Social protection and educationThe Social Cash Transfer Programme received K564.2 million, bringing its cumulative 2026 releases to K2.3 billion. Schools received K841.4 million in grants for the free education programme, taking school grants released during the year to K2.4 billion. Grant-aided institutions, including hospitals and universities, received K709.3 million. A further K507.3 million went to the Public Service Pension Fund for pension obligations. Roads lead the capital allocationCapital expenditure totalled a rounded K1.2 billion. The statement identified K592 million for roads, K243.3 million for water infrastructure, K188.9 million for rehabilitation of the National Assembly buildings, K101.3 million for education infrastructure and K50 million for mini-hospital projects. The listed projects add up to K1.1755 billion, broadly consistent with the rounded capital total. Roads alone accounted for just over half of the specified capital allocations. Debt payments remain a major claim on cashTreasury released K4.3 billion for domestic and external debt service and the dismantling of domestic arrears. The statement did not provide a further split among those three obligations. Nkulukusa said continued debt servicing and arrears clearance were important for fiscal credibility and for creating room for investment and economic growth. The allocation also illustrates the continuing pressure that past obligations place on funds available for current services and development. What the release figures do not yet showA Treasury release is an important step in budget execution, but it is not the same as verified expenditure or a completed project. A fuller assessment would require information from the receiving institutions on utilisation rates, procurement, beneficiary coverage, arrears cleared and measurable service outcomes. The Treasury said the second-half focus would be on converting available resources into stronger services, productive infrastructure, economic opportunities and improved livelihoods. It also said expenditure would be prioritised to protect key programmes as geopolitical developments place pressure on global petroleum supplies and fuel prices.

Treasury Releases K21.1 Billion for July Services and Debt

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