Kwacha Soars to Two-Year High: What It Means for Zambians

The Zambian kwacha has entered 2026 on a remarkable winning streak, strengthening by more than 34 percent against the United States dollar over the past twelve months and earning the distinction of being the world’s best-performing currency in early January. By early February, the exchange rate had pushed below K19 to the dollar – levels not seen since July 2023 – in a rally that is being felt not just in financial markets but in the daily lives of millions of Zambians.

What Is Driving the Rally?

The Bank of Zambia’s directive of 26 December 2025, which tightened the use of foreign currency in domestic transactions, triggered an immediate shift in market behaviour. Dollar holders rushed to sell, corporates converted foreign exchange reserves into kwacha to meet tax obligations, and importers brought forward their local currency demand to fund operations.

Alongside this decisive action, record copper prices have boosted Zambia’s export receipts, with three-month futures on the London Metal Exchange surging above $13,000 per tonne. A structural shift is also underway: since October 2025, Chinese mining firms have begun paying mining taxes in renminbi/yuan, making Zambia the first African country to collect mineral taxes in Chinese currency. Finance Minister Situmbeko Musokotwane expects approximately 15 percent of mining tax settlements to be denominated in yuan this year, diversifying foreign exchange inflows and reducing dollar dependency.

What It Means for Ordinary Zambians

For a nation where fuel, cooking oil, fertiliser and medicine are largely imported and priced in dollars, a stronger kwacha translates directly into lower costs. The Zambia Association of Manufacturers has called for the currency’s gains to be passed on through price reductions on both imported and locally manufactured goods. For households spending a significant share of their income on food and transport, even modest reductions at the pump and the market make a meaningful difference.

The currency’s strength has also been a key driver of Zambia’s falling inflation, which declined from 15 percent in 2024 to 9.4 percent in January 2026. Lower inflation means wages and savings hold their value for longer – welcome relief for workers, pensioners and small-scale traders who bore the brunt of price increases in recent years. For farming communities, cheaper imported fertilisers and agricultural inputs ahead of the 2025/26 season offer a further boost.

With roughly two-thirds of Zambia’s public debt denominated in foreign currency, the stronger kwacha also reduces the government’s debt servicing costs, freeing up resources for investment in health, education and infrastructure.

Sustaining the Momentum

The kwacha’s performance sits within a broader economic recovery: GDP growth is projected at 6.4 percent in 2026, load-shedding has eased significantly, and major investments are flowing into mining expansion, energy infrastructure and transport corridors. Economist Dr Lubinda Haabazoka has predicted continued appreciation, supported by strong mining earnings, adequate energy supply and good agricultural output.

However, sustaining these gains will require continued policy discipline, economic diversification beyond copper, and accountability from businesses to pass exchange rate savings on to consumers. For now, the message for ordinary Zambians is clear: the kwacha’s strength is showing up where it matters most – in the cost of mealie meal, a litre of fuel and a course of medicine – and the economic fundamentals are moving in the right direction.