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Zambia: Copper Prices affecting The Economy

As the world’s 7th largest copper producer the country of Zambia relies heavily on copper mining which accounts for over 70% of its export earnings. Fluctuations in copper prices significantly impact Zambian GDP growth, government revenues, employment and foreign currency reserves.

When copper prices declined from 2011-2016— Zambia’s GDP growth dropped from over 10% to just 2-3% by 2015. Government spending had to be slashed given lower tax intakes from copper mining firms. Over 21,000 mining jobs were lost during this period.

Global demand for copper is expected to double by 2035 due to the green and electric vehicle revolution, leading to a shift from oversupply to deficit in the coming years. Zambia is positioned as a potential alternative source of copper to major producers like Russia and Mongolia. The study on the impact of copper price movements and variability highlights how Zambian copper sold in world markets at fluctuating prices affects the economy. Price variability can have significant implications for economic stability and growth.

Conversely, the recent rebound in copper prices driven by rising global demand has buoyed Zambia’s economy. Copper mining output and new investments have risen. Higher copper export earnings have increased foreign currency reserves and stabilized the Kwacha. This helps Zambia import essentials like fuel, medicine and industrial inputs.

Zambia remains vulnerable to over-reliance on copper. The government is trying to diversify the economy into these sectors, such as— agriculture, gemstone mining, manufacturing, tourism and hydroelectric power generation. Success depends on infrastructure development, skills training and export promotion beyond copper.

Copper prices are projected to remain strong in the near term as global decarbonization efforts increase demand for copper wiring in renewable energy, EVs and electricity infrastructure. As an early mover in EVs— Zambia could make use of its copper resources to develop battery manufacturing and EV assembly industries. This would bring jobs and technology while reducing fuel import bills. Zambia must guard against “Dutch Disease” where over-reliance on copper strengthens the Kwacha, harming competitiveness of other exports. The government should closely manage Kwacha appreciation and continue diversification.

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