Exract 5 - structural issues in the Zambian economy


The Zambian Economy

  • 20 marker will come froms this 
  • since stimulus material was written - macroeconomic climate for zambia has worsened considerably 
    • GDP growth is falling
    • inflation is rising
    • currency is declining
  • supply side policies mostly 
  • zambia is a factor driven developing country and has enjoyed strong gdp growth in recent years
  • HDI ??? sustainablity??? will zamb govt get through diff period of falling copper prices and rising inflation?? how best zan zamb benfit from regional and globalt rade?? hwo can it diversofy aaway from high dependance on copper 

world bank report on zambia 

  • w/ strong economic growth in last decade traceable to significant investments in zambias copper minng sector, zambia has now reached lower-middle-income status
  • despite this income growth, however, more than 60% of its people live below the antional poverty line
  • in addition, a century of mining has imposed enviromental and publc health costs on the country and its people --- externalities of growth
  • economic growth target of 7% which is a little above hcinese growth target
  • 2007-2010 was achieving target and more
  • 2010-2013 was still achieving above 6% howver from 2014- now is declining - currently 4%
  • with the slowdown of growth, gdp per capita also significantly decreased and is now at 0.6% with 4%

growth and development limiters 

  • ifrastructure gaps
  • primary export dependancy
  • macroeconomic instability
  • conflict and corruption
  • human resource gaps
  • insufficient savings and high debt
  • natural capital depletion
  • rising income inequality

key structural issues facing zambian economy

  • structural issues refer to underlying weaknesses of the supply-side of the zambian economy
  • some supply-side deficiencies
    • low capital investment as a share of GAP and falling private sector investment - in part the result of changing corporation tax and royalty regimes and more recently the global slump in coper prices
      • too much of the money was invested into mining rather than other industries 
    • heavy dependance on copper mining - volatile ToT revenues and investment
    • low productivity agriculture- still emplyoeing over 60% of workforce
    • high rates of unemployment and under employment ( a dual labour market)
    • sever infrastrucutre weaknesses - especially poewr supplies and poor transport networks which increase the costs of doing business
    • inadequate financial services industry - ppor & expensive access to credithigh levels of income and wealth inequality (high gini coefficient = 0/575
    • high drop out rate for secondary education and poor qual of teaching
    • zambian anufacturing industry is shrinking (example of premature de-industrialisation associated with the natural resource curse)
      • shar eof output in zambian manufacturing is declining - big weakness 
    • outward migration of some skilled, younger owrkers - estiamted to be 1.5% of the zambian population in 2011 - may go to RSA, Botwana and UK

supply side constraints - poor access to credit

  • less than 38% of the zambian adult population have access to any form of financial service
  • 63% of people excluded from financial access in 2009
  • lending to the private sector is low at 12% of gdp in 2013 below sub saharan abv of 21%
  • interest rates on loands are high
  • businesses…


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