Zambia - Country Economic Memorandum : Policies for Growth and Diversification, Volume 1. Main Report
In October 1991 Zambia moved to a multiparty democratic system. In the following years, the government implemented a number of policy and structural reforms, liberalizing exchange and interest rates, simplifying the tariff structure, and removing q...
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| Format: | Country Economic Memorandum |
| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/10/5442375/zambia-country-economic-memorandum-policies-growth-diversification-vol-1-2-main-report http://hdl.handle.net/10986/15666 |
| Summary: | In October 1991 Zambia moved to a
multiparty democratic system. In the following years, the
government implemented a number of policy and structural
reforms, liberalizing exchange and interest rates,
simplifying the tariff structure, and removing quantitative
restrictions on trade, privatizing most state-owned
enterprises, and substantially withdrawing from the
agriculture sector. Despite these reforms, economic growth
has remained lackluster, and poverty and social conditions
have worsened. There are however, hopeful signs that
increased growth and poverty reduction are within reach in
Zambia. The country's economy has long been tied to the
copper industry, whose purchasing power has been in decline
for decades. But declining copper prices were not the only
reasons Zambia's economic performance declined between
1991 and 2002. Excluding the one-time disruption in real
sector activity in 1994-95, real GDP grew at an average
annual rate of 3 percent during 1991-2002. The report argues
that estimates puts its annual long-term growth potential at
about 5 percent, implying per capita income growth of
2.5-3.0 percent a year, and, the reason why its potential is
not being achieved, lies in several key problems, namely
macroeconomic mismanagement, lack of ownership of reform and
poor policy implementation, a weak investment climate, lack
of good governance, and, the HIV/AIDS pandemic. And further
asserts that central to the lack of macroeconomic stability
- in particular to the high inflation and real interest rate
- is the lack of fiscal control and commitment to fiscal
discipline. Zambia's large external and rising domestic
debt, combined with budgetary dependence on external
financing, has constrained the government's ability to
exert monetary control to achieve macroeconomic stability.
The financial sector must become more efficient and capable
of supporting private investment and growth. Key
institutional and policy issues for immediate attention are
creating a mechanism to resolve the debt of failed banks and
state-owned non-bank financial institutions; upgrading the
human and technological resources of financial system
regulators and supervisors; improving access to financial
services, in particular rural financial services; and,
investing in financial system infrastructure to improve
market data, and accounting and auditing standards. The
report expands on the country's opportunities in the
mining sector, particularly copper, but also on its rich
reserves of gemstone minerals, as an opportunity for export
diversification; in the manufacturing sector, specifically
textiles, garments, and processed foods; and, in tourism development. |
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