(Bloomberg) -- Zambia’s economy will probably expand by the smallest amount since 1998 — besides a contraction during the height of the pandemic in 2020 — because of a worse-than-anticipated impact from a record drought that the International Monetary Fund warned will stunt growth.
The Washington-based lender trimmed Zambia’s economic outlook for the second time this year to 1.2% from 2.3%, it said in a statement Thursday. It had already in May more than halved the forecast, based on the impact of what the United Nations said was the worst regional dry spell in more than a century.
Production of Zambia’s staple corn crop fell by more than half and hydropower dams that supply about 85% of the country’s power are running near empty, meaning households and businesses receive no more than three hours of electricity daily.
The IMF expects the rate of inflation, which at 15.6% last month was the highest since December 2021, to continue accelerating due to past kwacha depreciation, increasing food and fuel prices as well as hikes in administrative prices.
The data came just as Africa’s second-biggest copper producer was emerging from a painful, years-long debt-restructuring process.
“The Zambian economy has been severely impacted by the prolonged power outages,” IMF mission chief Mercedes Vera Martin said. “Against heightened uncertainty, responsive policymaking will be paramount to sustain macroeconomic stability while building resilience to shocks.”
(Updates with IMF inflation expectation in fourth paragraph.)
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