Hakainde Hichilema, the newly reelected leader of Zambia, is beginning his second term as Zambia’s president with the economy in a better position than the one he inherited in 2021.
Zambia has made progress on some of its biggest economic problems. The country has restructured much of its external debt three years ago. Inflation has fallen sharply and the Zambian kwacha, the country’s local currency, has even been able to hold its own against the dollar in the last five years. Zambia has also regained some of the confidence it lost after defaulting on its debt in 2020.
But the recovery has not fully solved the problems facing most households and businesses in the Southern African nation. For many Zambians, the economy is still judged by the price of food and whether there is enough income to cover basic needs. Poverty remains widespread and formal employment is limited. The government also has little room to spend more because debt payments continue to take up a large part of its budget.
Hichilema’s second term therefore begins with a different economic challenge from his first. He needs to preserve the stability his government has built while creating more jobs, improving household incomes and making it easier for businesses to grow.
For an average Zambian, the real test now is whether economic stability can translate into better living conditions for him and his household.
The cost of living is still the biggest test for Hichilema
For start, Zambia’s inflation rate fell to an eight-year low in the first five years of Hichilema’s presidency. As of August 2026, weeks before the election took place in the country, annual inflation stood at 6.2%, according to the Zambia’s apex bank. That is a big improvement from the double-digit inflation the country experienced during its recent economic crisis.
Naturally, one would assume the drop in inflation figures would make household goods suddenly become cheaper for Zambian households. But the reverse is the case.
In fact, the cost of living was a major issue during the 2026 election campaign that even Hichilema, going into the election, acknowledged that the benefits of economic stabilisation have not reached every household.
The problem becomes harder because the government has limited room to respond with more spending. Zambia is still dealing with a heavy debt burden and large debt payments. At the same time, households need higher incomes and more stable jobs if they are to cope with prices that remain high. Zambia’s public debt stood at roughly $13.8 billion at the end of 2025, and debt-service costs continue to consume a large share of government revenue even after the country’s 2023 restructuring deal with foreign lenders.
Real wages, meanwhile, have struggled to keep pace, with household purchasing power becoming eroded faster than incomes have grown.
“Inflation is barely part of the problem for Zambia’s economy. An average Zambian still earns relatively what he did five years ago even though the value of the currency has depleted more than half in the past decade, leaving most low and mid-income earners in the country below the poverty line”, John Nyanja, an Economist based in Nairobi, tells Businessfront.
Hichilema will need the economy to create more jobs and raise incomes so that households can afford the goods and services they need.
High debt continues to limit government spending
Hichilema is facing a two-edged sword challenge of high debt to foriegn lenders and the inability for the government to spend more than it earns on infrastructure, heath and education. The nation’s debt crisis to international lenders pushed it into default in 2020.
The government reached agreements with most of its external creditors as part of a restructuring programme supported by the IMF. By January 2026, the IMF said agreements had been reached on about 94% of the external debt covered by the restructuring process.
The debt burden has also fallen. Zambia’s public debt was about 133% of GDP in 2023. The IMF estimated that it had fallen to about 86% by June 2025.
Yet, despite this progress, debt service still consumes resources that could otherwise go towards development.
The problem is that the government still has a large debt bill to pay. Zambia’s 2026 budget set aside K52 billion ($2.8 billion) for domestic debt service and K21.7 billion ($1.1 billion) for external debt service. That is a large commitment for a country that also needs to expand electricity infrastructure, improve roads, support agriculture and fund health, education and social protection.
Grace Kimaro, a Tanzanian economist, told Businessfront that Zambia’s debt restructuring will only have a lasting economic impact if the government can create enough fiscal space to invest in areas that support growth.
“Right now debt service is still consuming too much of the 2026 budget. To fix that, President Hichilema must raise domestic revenue, cut wasteful spending, and stop new commercial borrowing. Without those three steps, Zambia will not have money for investment and risks sliding back into a debt crisis,” Kimaro said.
This leaves Hichilema with a difficult spending decision. Zambia needs to invest more if it wants to create jobs and raise living standards. But spending too much without enough revenue could put pressure on the public finances again.
The debt problem is therefore more than a question of how much Zambia owes. The government needs enough money left after paying its debts to invest in the economy and provide basic services. Debt restructuring has given Zambia more room than it had during the crisis, but it has not removed the limits on what Hichilema can spend.
Poverty and weak job creation remain stubborn problems
The biggest weakness in Zambia’s recovery is that economic stability has not yet translated into sufficiently broad improvements in living standards.
The World Bank estimated that 12.6 million Zambians were living below the international poverty line of $2.15 a day in 2022. The Living Conditions Monitoring Survey also put poverty at around 60%. The figures point to the same problem. A large share of Zambians are still struggling to earn enough to meet their basic needs.
Jobs are central to changing that. Zambia’s official unemployment rate has fallen to 9.9%, down from 12.9% in 2021 and 12.6% in 2022. The figure points to an improving labour market.
But the quality of employment remains a concern. 76.3% of employed people were informally employed, while only 23.7% were formally employed. A fall in unemployment therefore does not necessarily mean that more Zambians have found secure jobs that can provide enough income to move their families out of poverty.
According to Ibrahim Imran, a Lagos-based macroeconomic specialist, Zambia needs to focus on the quality and productivity of jobs if economic growth is to make a bigger difference to poverty.
“What the country needs is a deliberate shift toward formal, productive employment. These are the jobs that create demand in the economy. Without that structural shift, GDP can grow but poverty levels will remain high because most households will still not have decent incomes,” Imran told Businessfront.
This helps explain why economic growth can happen without a similar improvement in household incomes. A person can be counted as employed while still earning too little to escape poverty. For Hichilema, the challenge is to create jobs that provide a more reliable income rather than simply increase the number of people working.
Zambia needs more businesses that can employ people. The government also needs to make it easier for private businesses to invest and grow by improving access to finance, keeping economic policies predictable and reducing some of the costs of operating a business.
Zambia remains vulnerable to external shocks
From the external point of view, Zambia’s recovery is also exposed to problems that are largely outside the government’s control. Copper accounts for a large share of the country’s export earnings, making the economy vulnerable to changes in global commodity prices. Higher copper production can support exports, government revenue and investment, but a sharp fall in prices would put pressure on the same gains Hichilema is trying to protect.
Electricity is another risk. Zambia relies heavily on hydropower, leaving electricity generation exposed to poor rainfall and drought.
Imran says Zambia’s dependence on copper and hydropower leaves its growth vulnerable to shocks that can quickly affect government revenue, businesses and households.
“Zambia needs to reduce its dependence on a few sources of income and power. When copper prices fall or drought reduces hydropower generation, the effects spread across the economy. Diversifying production and investing in more reliable power sources will give the country a better chance of sustaining growth when these shocks occur,” Imran added.
This means diversification will matter during Hichilema’s second term. The government needs to use higher copper production to support local suppliers, manufacturing and services while investing in electricity and agriculture that can withstand climate shocks, Imran noted.
A more diverse economy would make Zambia less dependent on the performance of one commodity or favourable weather.
Hichilema must turn economic stability into stronger growth
No doubt, Hichilema’s second term starts from a stronger economic position than his first. The government can point to lower inflation, progress on debt restructuring, stronger reserves and improved investor confidence. Zambia is no longer dealing with the immediate crisis that followed its sovereign default in 2020.
But stabilising an economy is different from transforming it. The next challenge is to turn the progress seen in the main economic figures into stronger incomes, more jobs and higher investment. Lower inflation needs to translate into greater purchasing power, while the government needs enough revenue to fund essential services and infrastructure without allowing debt to rise again.
Private investment will be important to achieving this. Government spending alone cannot create enough productive jobs or build all the businesses and infrastructure Zambia needs. Companies need to be able to expand and hire, while investors need confidence that economic policies will remain predictable. Better access to finance, reliable electricity and improved infrastructure will also be important if smaller businesses are to grow beyond informal activity.
This is the economic test Hichilema faces in his second term. His first term was largely about restoring stability after Zambia’s debt crisis. His second term will be judged by whether that stability leads to better living standards and a broader economy.
Zambia has spent years trying to recover from its debt crisis. Hichilema now has to show that economic stability can become the foundation for stronger and more widely shared growth.
