NEWS & POLITICS
Zambia’s Kwacha becomes one of Africa’s best-performing currencies after dollar clampdown
The Zambian Kwacha has emerged as one of Africa's strongest-performing currencies against the US dollar, gaining nearly 10 percent over the past two years as Lusaka accelerates policies aimed at stabilizing its once heavily dollarized economy.
Michael Oduor
LUSAKA, Zambia | January 7, (Running Africa) — A convergence of factors has driven the rally: an aggressive domestic dollar sell-off, rising global copper prices, tighter currency rules from the central bank, and a policy allowing Chinese-owned mining firms to settle tax obligations in yuan. Together, the measures have reshaped currency demand and strengthened confidence in the kwacha.
On December 26, 2025, the Bank of Zambia reaffirmed that the kwacha is the country's sole legal tender, underscoring that domestic transactions must be conducted in local currency. While the directive carved out exemptions for select sectors, the announcement triggered a sharp, immediate sell-off of US dollars by individuals, corporates, and major institutions across the country.
Targeted exemptions to protect key sectors
As Africa's second-largest copper producer, Zambia hosts a significant number of Chinese-owned mining operations. Rather than enforce strict kwacha-only payments across the board, authorities opted for a pragmatic approach, allowing these firms to pay taxes in Chinese yuan.
Other exemptions apply to the purchase of specialized mining equipment, foreign loan transactions, and parts of the tourism sector, particularly payments made by foreign visitors. Officials say the carve-outs are designed to preserve foreign investment flows while still reinforcing the dominance of the local currency in everyday commerce.
De-dollarization gathers pace
Image: bloomberg.com)
Zambia's strategy mirrors a broader push among emerging economies to reduce dependence on the US dollar. The policy shift is delivering short-term gains, with the kwacha benefiting from lower domestic dollar demand and improved trade dynamics.
The move also aligns with China's own push to internationalize the yuan, as Beijing increasingly allows trading partners to use the currency for loans and the purchase of Chinese goods and services.
Copper prices add momentum
Workers load copper sheets at a Zambian mine as higher copper prices bolster the kwach (Image: fenceafrica24.com)
A surge in copper prices has further boosted support for the kwacha. Three-month copper futures climbed nearly 5 percent to a record $13,090 a ton on Tuesday on the London Metal Exchange, according to Reuters.
Copper accounts for the bulk of Zambia's export earnings, and higher prices have strengthened foreign exchange inflows. The country ranks second only to the Democratic Republic of the Congo in African copper production, making the metal a central pillar of its currency outlook.
Analysts caution that sustaining the kwacha's gains will depend on policy consistency and global commodity trends. Still, for now, Zambia's de-dollarization drive is delivering one of the strongest currency performances on the continent.
