Dec. 26, 2025 /Mpelembe Media/ —In 2025, Zambia’s economic challenges were significantly exacerbated by deep-seated structural rigidities that prevented the country from benefiting from a stable national currency. Even though the kwacha remained stable for a six-month period, these underlying flaws ensured that the cost of living remained high for the average citizen.
These structural issues worked in tandem with inflation, which had already “destroyed” actual household incomes, leaving families with severely diminished purchasing power. Because of these rigidities, the high cost of essentials like food forced Zambian families to reduce spending on nutrition, healthcare, and education, a trend that increases societal fragility and restricts long-term human capital development.
Ultimately, these rigidities meant that while the “price” of money (the exchange rate) was stable, the internal mechanics of the economy were too inefficient to translate that stability into affordable living conditions for the population.
To understand this, imagine a water tank (the economy) where the inlet valve (the exchange rate) is fixed and working perfectly, but the internal pipes (infrastructure and logistics) are heavily clogged. No matter how steady the water flow is at the entrance, the people at the other end only receive a tiny, expensive trickle because the system inside is broken.
Zambia’s cost of living has remained persistently high despite a stable exchange rate for the kwacha over a six-month period because of deep-seated internal economic issues. According to Oswald Mungule, President of the Economics Association of Zambia (EAZ), the stability of the currency has not translated into lower costs for citizens due to several critical factors:
Structural rigidities are foundational flaws within an economy that prevent the cost of living from decreasing, even when other economic indicators—such as exchange rates—show signs of stability. According to the sources, these rigidities act as a barrier to affordability and long-term economic health.
Structural rigidities contribute to high living costs in the following ways:
Inefficient Logistics and Infrastructure
One of the primary ways structural rigidities drive up costs is through inadequate infrastructure and ineffective logistics and transportation systems. When the systems required to move food, energy, and goods are inefficient, the overhead costs are passed on to the consumer, keeping prices for essentials high even if the national currency is performing well.
Low Productivity and Stagnant Incomes
Structural flaws often lead to chronically low productivity levels. In economies like Zambia, it has been observed that high living costs persist because inflation destroys people’s actual incomes, while the underlying structural rigidities prevent the productivity gains that would typically help lower the market price of goods. This creates a cycle where expenses outpace incomes, leading to societal fragility.
Labour Market Limitations
In countries like Nigeria, structural rigidities are evidenced by a scarcity of formal employment options. These rigidities discourage labour participation and hinder skill retention, which limits the development of human capital. Without a robust and skilled workforce, the economy cannot easily adapt or innovate to reduce the costs of essential services.
Resistance to Market Corrections
Structural rigidities can cause a “silent but decisive” damage to economic fundamentals. For instance, in Zambia, the cost of living remained high despite the kwacha’s stable exchange rate over a six-month period. This suggests that when structural rigidities are present, simply stabilising the currency is not enough to lower prices if the underlying systems for production and distribution remain broken.
Ultimately, these rigidities force families to reduce spending on nutrition, healthcare, and education, which further weakens the economy’s future potential and increases household vulnerability.
For example, consider a water pipe (the economy) that is clogged with rust and debris (structural rigidities). Even if you increase the water pressure at the source (stable exchange rates or policy changes), only a small, expensive trickle reaches the end-user because the internal structure of the pipe is too damaged to function efficiently.
These affordability issues “silently but decisively” damage economic fundamentals. When the cost of living remains high despite a stable currency, it forces families to reduce spending on nutrition, healthcare, and education, which increases societal fragility and hinders long-term development.
To understand this, imagine a house with a leaking roof. Even if the weather outside becomes calm and sunny (currency stability), the interior remains damp and damaged because the internal structure of the house (infrastructure and productivity) has not been repaired. Simply stopping the storm does not fix the damage already present inside the home.
Rising living costs trigger a detrimental chain reaction that undermines the foundations of long-term economic development. When the prices of essential goods like food, housing, and energy rise faster than wages, the resulting financial pressure erodes household purchasing power and exposes deep-seated structural flaws within national economies.
The impact on long-term development can be categorised into several key areas:
Erosion of Human Capital
A high cost of living forces families to make difficult trade-offs. As actual income rapidly declines, consumers are often compelled to reduce spending on nutrition, healthcare, and education. By cutting back on these “future-building” investments, societies experience a limitation in human capital development, which is essential for sustained economic growth. Furthermore, the financial strain often pushes families into debt or a reliance on social support systems, increasing societal fragility rather than building resilience.
Declining Productivity and Labour Participation
When employees cannot afford their basic needs, productivity inevitably suffers due to:
Physical and Mental Strain: High expenses lead to weariness, stress, and a drop in morale, which results in decreased output and increased absenteeism.
Skill Retention Issues: In economies like Nigeria, high living costs have been shown to discourage labour participation and hinder the retention of skilled workers.
Operational Costs: Employers face mounting pressure to increase wages. In environments where wage adjustments are slow, this can drive up operating expenses and reduce profit margins, stifling business growth.
Damage to Economic Fundamentals
Chronically high costs “silently but decisively” damage the core fundamentals of an economy.
Investment and Trust: Prolonged affordability issues negatively affect public trust and discourage both local and foreign investment.
Structural Rigidities: As seen in Zambia, high costs can persist even when exchange rates are stable if the economy suffers from low productivity, inadequate infrastructure, and ineffective logistics.
Savings and Inflation: Inflation destroys personal incomes, leaving households with no capacity for savings, which further restricts the pool of domestic capital available for economic expansion.
Ultimately, when everyday life becomes unaffordable, economic progress loses its meaning, as the structural rigidities of the economy prevent growth from translating into improved standards of living.
To understand this better, consider a marathon runner (the economy) being forced to carry an increasingly heavy rucksack (living costs). While the runner might keep moving for a while, the extra weight eventually causes exhaustion, forces them to stop training for future races (lack of investment in education/health), and may ultimately lead to a complete breakdown before the finish line is reached.
A high cost of living has a direct and detrimental impact on employee productivity, creating a cycle where financial strain at home translates into diminished performance in the workplace. According to the sources, when employees are unable to afford their basic needs due to rising prices, their productivity levels unavoidably decline.
The sources highlight several specific ways this impact manifests:
Psychological and Physical Strain
High living expenses create significant personal burdens that employees carry into their professional lives. This financial pressure leads to:
Weariness and Tension: Constant worry about meeting basic needs causes physical and mental exhaustion.
Drop in Morale: As the cost of essential goods and services outpaces wages, employees often experience a decrease in motivation and engagement.
Increased Absenteeism: The combined physical and emotional toll of financial hardship frequently results in higher rates of workers missing days of work.
Erosion of Incomes and Skills
The broader economic environment, such as that seen in Zambia, demonstrates that when inflation destroys people’s incomes, productivity levels tend to remain chronically low. In countries like Nigeria, high living costs have been shown to discourage labour participation. Furthermore, the inability to afford a standard of living in a specific area hinders skill retention, which limits the overall development of human capital within the economy.
Operational Pressure on Employers
The impact of a high cost of living also extends to the employer, creating a secondary effect on productivity through operational strain.
Wage Pressures: Employers face mounting pressure to increase salaries to help staff cope with rising costs.
Reduced Profit Margins: In environments where wage adjustments are slow, the struggle to balance fair compensation with rising operating expenses can reduce profit margins, potentially stifling the investments needed to improve workplace efficiency.
Ultimately, a high cost of living acts as a “silent but decisive” force that damages the fundamental economic health of a region by ensuring that even if people are employed, they lack the resources and wellbeing necessary to be fully productive.
To visualise this, think of an overheated engine. If the fuel (wages) is insufficient to keep the parts lubricated and cooled against the friction of the environment (living costs), the engine will eventually begin to grind, lose speed, and may eventually seize up entirely, regardless of how hard the driver tries to push it.