Zambia's Rating Improves on Africa Financial Development Index

The Absa Africa Financial Market Index (AFMI) evaluates the financial development of countries based on market accessibility, openness, and transparency. Zambia’s score has improved from 52 in 2021 to 54 this year. Primarily this is driven by the fall in inflation rates from 21.3% last October to 9.7% at present, a new deal with the IMF, and the strong performances of the kwacha. The report praised Zambia as one of only three countries in the survey to have deflated prices this year. 

The six ‘pillars’ of investment are categorised as:

1.     Market depth

2.     Access to foreign exchange

3.     Market transparency

4.     Capacity of local investors

5.     Macroeconomic opportunity

6.     Legality and enforceability of standard financial markets master agreements.

Zambia’s upgraded rating relates primarily to a “significant decrease in inflation and improved growth outlook” regarding macroeconomic opportunity. This year has seen Zambia agree a huge $1.3bn dollar debt restructuring deal with the IMF, as well as a World Bank loan, designed to improve confidence in Zambian markets and reduce the burden of debt servicing that was troubling the nation’s economy. Additionally, FQM agreed a major billion-dollar investment into its mines into the country and the government of Zambia have made a number of changes to improve the investor outlook including tax concessions in the mining and agricultural sectors in order to drive growth.

Despite the improved score, Zambia remains ranked 12th out of the 26 African countries surveyed. It does, however, move one point closer to Tanzania who rank 11th.

Zambia ranks very favourably for legal standards and enforceability but is held back by shallow market depth and low capacity of local investors. The government’s 2023 budget has increased the funding for the Constituency Development Fund but such changes are yet to be realised. It is hoped the planned 19.8% increase in the Social Cash Transfer Programme will boost the capacity of small and medium sized enterprises to invest in the local economy.