🇿🇲 CONTEXT | Kwacha Leads the Pack as Policy, Copper & China Rewire Zambia’s FX Story
Zambia’s kwacha has carried its late-2025 momentum straight into the new year, emerging as the world’s best-performing currency in early 2026 and forcing markets to reassess a country long associated with volatility rather than strength.
Since the start of December, the kwacha has gained close to 10 percent against the US dollar, outperforming every major and emerging-market currency tracked by Bloomberg. The rally accelerated this week with a near-4 percent jump in a single session, the sharpest one-day advance since October 2023, pushing the currency to a fresh two-year high around K19 per dollar.
At the core of the move is policy. The Bank of Zambia’s December 26 directive tightening the use of foreign currency in domestic transactions triggered an immediate shift in behaviour. Dollar holders rushed to sell, corporates converted foreign exchange to meet tax obligations, and importers front-loaded kwacha demand to fund early-year operations.
“The directive changed incentives overnight,” said Chipo Shimoomba, a treasury dealer at First Alliance Bank of Zambia. “Once dollar demand dropped, sellers dominated the market.”
But the rally is not just regulatory. Zambia is benefiting from a powerful external tailwind. Copper prices have surged to record levels, with three-month futures on the London Metal Exchange hitting $13,090 a tonne this week. As Africa’s second-largest copper producer, Zambia is seeing export receipts swell just as fiscal discipline has tightened and investor confidence has improved.
A more structural shift is also underway. Since October, Chinese mining firms operating in Zambia have begun paying mining taxes in renminbi rather than US dollars, making Zambia the first African country to formally collect mineral taxes in Chinese currency. Finance Minister Situmbeko Musokotwane expects about 15 percent of mining tax settlements this year to be denominated in yuan, a move that both diversifies foreign-exchange inflows and aligns with Zambia’s trade reality, given that much of its copper ends up in China.
For the central bank, this is about more than symbolism. Yuan receipts support reserve diversification, reduce dollar dependency and lower transaction costs when servicing Chinese debt. Combined with higher copper earnings, the effect is a steadier foreign-exchange pipeline that cushions the kwacha from the sharp swings that have defined previous cycles.
Markets are taking note. Zambia’s dollar bonds due in 2053 gained 0.74 cents this week, trading above 71 cents on the dollar, a sign that currency strength is feeding through into broader credit confidence. The kwacha’s appreciation has also begun to ease import costs, offering some relief to households and firms battered by high fuel, food and medicine prices over the past two years.
Still, economists warn against complacency. A strong currency can quickly become a liability if export momentum falters or policy discipline slips. Copper remains dominant, and diversification beyond mining remains limited. Reserve accumulation, consistent tax collection and continued confidence from foreign investors will determine whether the kwacha’s surge becomes a durable trend or another sharp, temporary upswing.
For now, the signal is clear. Entering 2026, Zambia is no longer just stabilising. It is reshaping how its economy connects to global markets, from copper pits to currency desks, and the kwacha is reflecting that shift in real time.
© The People’s Brief | Ollus R. Ndomu