In 2017, Zambia’s economic growth to recovered to an estimated 3.9% (from 3.8% in 2016) on the back of a bumper crop harvest and better electricity supply. Faster economic recovery was dragged by large government payment arrears, which exerted pressure on the financial sector. Non-performing loans rose to 12.3% of outstanding loans, and lending to the private sector declined, thus constraining private investment and consumption.
Growth is projected to strengthen to above 4%in 2018 and over the medium-term. The clearance of arrears and the pursuit of accommodative monetary conditions should bolster the recovery of the financial sector and unlock consumption and investment lending. High international copper prices and improved domestic production from newer and recently refurbished mines is expected to support exports.
High copper prices have eased external pressures, leading to a stable kwacha, which, together with a bumper harvest, helped contain inflation within the medium-term target of 6-8%. These improvements prompted the central bank to ease monetary policy at all the past six monetary policy committee meetings, for a total policy rate cut of 575 basis points.
However, the fiscal-debt remains fragile, as it remains higher than necessary to calm debt growth, despite being below its 2017 budget target. External debt rose US$8.7 at end-March 2018 from US$7.9 at end-2017, and total public and publicly guaranteed debt now estimated to be close to 61% of gross domestic product (GDP). In October 2017, a joint IMF-World Bank Debt Sustainability Analysis elevated the risk of external debt distress to high from medium.
Large and landlocked in the center of southern Africa, Zambia shares several of its key geographical and economic features with neighboring Zimbabwe—the Victoria Falls, Lake Kariba (and its hydroelectric capacity), and a stretch of the Zambezi River. It also borders the southern tip of Lake Tanganyika and Tanzania, as well as the Democratic Republic of the Congo, Angola, Botswana, Mozambique, and Malawi. Its population, much of it urban, is estimated at about 16.5 million (2016).
Though stable for most of its post-colonial history, the country entered a new phase when President Edgar Lungu and his Patriotic Front (PF) government were re-elected in a closely contested presidential race in August 2016. Lungu’s main rival, Hakainde Hichilema, was detained for several months in 2017; international mediation secured his release.
The election gave Lungu a five-year mandate. He has called for an end to moral decay and national transformation to address high levels of poverty. Zambia will revise its Lands Act to avoid the indiscriminate and illegal sale of land in the country. The need to revise the act was initiated by Lungu, who observed the government needed to come up with revisions that guarantee sovereignty over land, a key natural heritage.
A Systematic Country Diagnostic (SCD) has been prepared to augment the World Bank’s understanding of the sort of mechanism needed for poverty reduction in Zambia. The SCD has been used to inform the Bank’s Country Partnership Framework (CPF), which is being developed for 2017–2023.
The government has launched its 7th National Development Plan, 2017–2021, calling for a fundamental shift in the way resources are allocated. It’s five pillars are:
- Economic diversification and job creation
- Poverty and Vulnerability
- Reduced Developmental Inequalities
- Enhancing Human Development
- Conducive Governance Environment for Economic Diversification
The strategic goal of the 7th National Development Plan is to create a diversified and resilient economy for sustained growth and social economic development. It will also include a results-oriented, performance management system to be used to measure the progress of its implementation.