- Middle East conflict threatens gains
NKOMBO KACHEMBA
Lusaka
ZAMBIA’S banking sector posted strong results in 2025, with solid profits, better asset quality and increased lending, but rising Middle East tensions now threaten those gains, says the Bankers Association of Zambia (BAZ).
Chief executive officer Leonard Mwanza said in an interview that the sector recorded one of its best years, with banks remaining highly competitive and well capitalised.
“The performance of the banking sector in 2025 was strong. It was one of those good years in terms of profitability, with increased competition among banks on which institutions posted the highest returns,” he said.
Mr Mwanza noted that asset quality also improved significantly, with nonperforming loans (NPLs) averaging just above three percent, well below the 10 percent benchmark, indicating a stable and resilient financial system.
He said the sector continued to play a critical role in supporting the economy, particularly through increased financing to energy and agriculture.
Financial institutions showed heightened interest in alternative energy solutions, including solar and thermal projects, with several initiatives rolled out across the country.
In agriculture, the sector leveraged the K5 billion facility by the Bank of Zambia, which attracted strong uptake, with a significant portion directed towards farming activities.
Notably, part of the financing supported climate-smart agriculture through investments in solar-powered irrigation systems and pumps.
“This kind of support to critical sectors will help drive agricultural output and sustain economic growth,” Mr Mwanza said.
He added that the sector’s strong fundamentals aligned with improving macroeconomic conditions, including a strengthening Kwacha and declining inflation, which fell to 7.1 percent in March, moving into the single-digit range.
However, Mr Mwanza cautioned that the positive outlook has been disrupted by geopolitical developments, particularly the escalation of tensions in the Middle East around February 20, which he described as a turning point.
“Just when things were looking bright, we were checkmated by developments in the Middle East. These pose a significant risk to our economic outlook,” he said.
He explained that rising global oil prices have already triggered an increase in domestic fuel prices, prompting government intervention.
Measures included the temporary removal of VAT on fuel imports for three months, an action expected to result in a revenue loss of over US$60 million.
While the move is aimed at cushioning citizens from rising costs, it may also affect government revenue collection and necessitate budget adjustments.
Mr Mwanza said the banking sector is preparing to support the economy through the anticipated shocks by safeguarding jobs, sustaining businesses and prioritising lending to growth sectors, including small and medium enterprises (SMEs).
He revealed that banks, in collaboration with the central bank, are finalising the Small Business Growth Initiative, which is expected to improve access to finance for SMEs.
Looking ahead to 2026, Mr Mwanza said prospects remain uncertain due to volatility in global oil markets and the unpredictable trajectory of the Middle East conflict.
“We do not yet know where oil prices are heading. The real impact has not fully hit us because we had some stockpiles in March. Going forward, the cost of crude oil could be much higher,” he warned.
He expressed hope for a swift resolution to the conflict, noting that prolonged instability could erode the economic gains Zambia has achieved through recent reforms.
Mr Mwanza emphasised that while the banking sector remains resilient, continued collaboration between Government and financial institutions will be key to navigating the external shocks and protecting Zambia’s economic stability…https://enews.daily-mail.co.zm/welcome/home
