(Bloomberg) -- Zambia’s economy will probably grow at its fastest pace in 13 years in 2025 as it bounces back from the worst drought in more than a century.
Gross domestic product is now seen expanding 6.6% in 2025, estimated growth of 2.3% for this year, Finance Minister Situmbeko Musokotwane said in his budget plan on Friday. That’s the fastest pace since 2012 and matches an International Monetary Fund forecast.
“The 2025 budget is premised on economic recovery and promoting growth to improve the livelihoods of our people,” he said.
The dry weather, driven by the El Niño phenomenon, scorched crops, slashed farm production and triggered an energy crisis by cutting supplies from hydropower dams, subjecting businesses and households to power cuts that often last an entire day. It came while the government tried to wrap up a debt restructuring exercise that started in 2020, when Zambia became Africa’s first pandemic-era sovereign defaulter.
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It also forced Musokotwane to make substantial changes to this year’s budget, boosting funding for the state’s drought response, which included social-welfare payments and a cash-for-work program to help people survive. The IMF agreed to augment its loan program by about $388 million in June, and the government asked the World Bank for more assistance.
The country is expected to benefit from the La Niña weather phenomenon, which typically brings normal- or -above-normal rainfall, next year. Still, the dry spell and economic downturn are affecting public finances just as the government resumed servicing its revamped loan obligations.
The budget deficit is expected to widen to 6.4% of GDP in 2024, compared with a previous estimate for a gap of 4.8% of GDP, Musokotwane said. The government aims to narrow the shortfall to 3.1% of GDP next year, he said.
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