Effects of Russia-Ukraine Conflict on Zambian Economy!

call I-NetCom Business Solutions on 0211 281139, Skype: kelvinmchisanga or simply email: kelvinc@zambia.co.zm

Written by: Kelvin Chisanga

The ongoing geopolitical conflicts between Russia and Ukraine has some serious devastating impact on many global economies across the board, and Zambia is not an exceptional case with the prevailing economic trends at both global and regional frontiers.

To begin with, the energy commodities have started receiving some price-growth, of which we have seen the price of crude oil on the international market, has already gone up to a price margin of $105 per barrel, and from the look of things, we have high chances of seeing this particular article of trade, escalating upwards with some margins of about 2 to 5% increase especially during this course of upcoming business week.

So with the case of Zambia, where we are moderating fuel cost-benefit analysis model on the monthly basis, we may get some wrong numbers on the business forecast and projections, as this will not be sustainable model of doing business given the current circumstances in place with the Zambian economy, where we are prone to global instability in copper prices.

So in short, this above case will prove to be pretty much unfavourable for the Zambian economy, as the fuel commodity projects to go up, it will definitely affect key fundamentals such as freight movements (transport cost factors) and food prices to likely be expensive, which will thus bring out a relatively negative inflation patterns.

Secondly, the impact on the financial sides as well as on the broader capital market are also one of the biggest elements on the table, posing a serious case to study with much consideration, as the market may be affected from the global financial systems.

However, it is quite revealing to state that the global capital markets have significantly gotten affected right from the start of this tension and this cause-effects have an equal spill over effects on the Zambian economy.

Zambia’s fiscus for this year of 2022 has some potential spot-lines of external funding in terms of stakeholder capacity support, though this stands out with government functions and conditions, in line with the policy direction which should remain with quite focused and prudent in the management of public funds and welfare.

skynews-ukraine-russia-subway_5684141

So with the current obtaining case of the Russia and Ukraine crisis, some of the cooperating partners who might have been thinking of giving nations budgetary support aid, particularly in targeting developing countries where Zambia falls, will be channeling of their resource to this seemingly new global crisis especially stakeholders will be targeting Ukraine, being the country that is perceived with some vulnerable positions.

The biggest impact also comes from Zambia’s biggest and main stay sector mining which has a large share of traditional export right into the Asian market, so in short the country’s export expenditure and income columns on the balance of trade will get badly affected, as the export expenditure will ultimately get an increase by leading to negatives on the balance of scale (Zambia will record trade deficit this period) which will also cause export to be much expensive in the short to medium term, a case which will bring about some serious trade imbalances in the country’s trade patterns, and this will affect by triggering local Foreign Exchange (FOREX) market destabilizations.

With the prevailing scenarios, we will see the Kwacha to be swinging with some losses, against the goodwill effect that we have so far witnessed. The effects will go tailwinds on the already on-going impacts of COVID-19 setting things contrary to the case that we are building up where we are seeing some spots or wishful thoughts of economic recovery in the domestic market.

Photo: Members of the Presidential Delegation meet with President Hichilema. From left, USAID Zambia Mission Director Ms. Sheryl Strumbras, U.S. Trade and Development Agency Chief of Staff Ms. Thamar Harrigan, Special Assistant to President Biden and Senior Director for Africa Ms. Dana Banks, President Hichilema, Acting Director of the United States Trade and Development Agency Ms. Enoh Ebong, and Chargé d’Affaires David Young of U.S. Embassy Lusaka.