As Africa’s second-largest copper producer, Zambia faces mounting pressure from sharp currency depreciation, driven by surging demand for U.S. dollars to finance energy imports, manufacturing equipment, and other critical sectors. The widening foreign exchange imbalance is intensifying pressure on the Kwacha, raising concerns over macroeconomic stability.
However, for diaspora investors, this depreciation presents a compelling arbitrage opportunity in Zambia’s real estate market and high-yielding local bonds. A weaker Kwacha enhances the purchasing power of foreign currency earners, making domestic assets increasingly attractive.
According to the latest data from the Bank of Zambia, net remittances soared 84.8% in 2024 to a record $238.1 million, up from $128.9 million, reflecting a surge in capital inflows amid currency weakness. Total remittances stood at $338.99 million in inflows against $100.85 million in outflows, underscoring how foreign exchange earners are capitalising on currency volatility.
On the domestic front, continued currency depreciation is fuelling inflationary pressures, prompting the central bank to raise its benchmark interest rate by 50 basis points to 14.5% in its first monetary policy decision of the year.
Outflow remittances encompass wages, salaries, business and investment transfers, education, medical expenses, and cross-border payments, while inflows primarily consist of diaspora remittances for investment, family support, and other purposes.
The Market Brain, The Kwacha Arbitrageur