Investigating the effects of fuel prices on Zambia’s economic growth

Sefuka, Chulu and Haabazoka, Lubinda (2025) Investigating the effects of fuel prices on Zambia’s economic growth. World Journal of Advanced Research and Reviews, 26 (1). pp. 716-736. ISSN 2581-9615

The research paper titled “Investigating of the Effects of Oil Prices on Zambia’s Economic Growth” provides a comprehensive analysis of the impact of global oil prices on Zambia’s economic growth. Zambia, a landlocked country in southern Africa, is heavily reliant on oil imports for its energy needs, making it particularly vulnerable to fluctuations in global oil prices. The study begins by outlining the critical role of oil in Zambia’s economy. Oil is a key input in various sectors such as transportation, manufacturing, and agriculture. It also plays a significant role in household energy consumption. The paper then delves into the historical trends of oil prices and correlates these with Zambia’s economic performance indicators over the same period. The core of the research employs econometric models to quantify the effects of oil price fluctuations on Zambia’s GDP growth rate. The models take into account various control variables, including global economic conditions, domestic economic policies, and other commodity prices. Preliminary findings suggest a significant negative correlation between oil price hikes and economic growth, underscoring the vulnerability of Zambia’s economy to external oil price shocks. The paper also explores the indirect effects of oil prices on other macroeconomic variables such as inflation, exchange rates, and fiscal balance. High oil prices not only increase production costs but also exacerbate inflation and put downward pressure on the local currency. This, in turn, can lead to a deterioration in the fiscal balance as the government spends more on oil imports. The study includes several case studies of periods of sharp increases in oil prices. These case studies provide a detailed analysis of how such periods have affected Zambia’s economy in the past. They also offer insights into how the government and other stakeholders have responded to these challenges. In the concluding sections, the study discusses potential strategies for mitigating the adverse effects of oil price volatility. These include diversifying the energy mix, improving energy efficiency, and establishing strategic oil reserves. The research underscores the need for comprehensive policies that address both the immediate challenges posed by oil price volatility and the broader goal of sustainable economic development. The fall in oil prices has had a significant impact on Zambia’s economy, affecting various sectors and leading to a slowdown in economic growth. However, the study concludes that with appropriate policies and strategies, Zambia can mitigate the adverse effects of oil price volatility and enhance its economic resilience. This study contributes to the literature by offering a nuanced understanding of how global oil prices affect a developing, oil-importing economy. The findings have significant implications for policymakers, researchers, and stakeholders interested in Zambia’s economic resilience and growth trajectory.