Zambia Economic Brief: Zambia’s Economy Continues its Recovery in 2017

LUSAKA, June 29, 2017 -- The Zambian economy has continued its recovery in 2017, but the stronger growth and better macroeconomic indicators have not resulted in an improvement in the fiscal indicators, says a new World Bank Economic Brief Reaping Richer Returns from Public Expenditures in Agriculture (pdf) released today.

“Efforts are needed to further reduce the stock of public expenditure arrears and improve commitment controls, including continuous monitoring to ensure the same problem does not reoccur,” said Gregory Smith, World Bank Senior Economist. “The issuance of a public debt strategy and better communication via quarterly debt reports would also be positive steps forward.”

According to the brief, growth of the economy is expected to increase to 4.1% in 2017 and further to 4.5% in 2018 and 4.7% in 2019, from 3.4% in 2016. Inflation declined to 6.5% in May 2017 (from a peak above 20% in February 2016) and, together with a stable kwacha, led the central bank to ease monetary policy, thereby reversing the pressure on credit growth. The brief notes that the Government has been making progress with its economic recovery plan ‘Zambia Plus’.

The forecast assumes the government will continue to implement its economic recovery plan, the harvest and electricity production will be stronger because of the favorable weather, and copper production will increase because of the new and recently refurbished mines.

The report highlights that Zambia has successfully increased the production of crops (mostly maize), largely thanks to the increased size of areas under cultivation as opposed to improved yields. This leaves enormous scope to increase agriculture productivity and to reduce the vulnerability associated with high dependence on rain-fed agriculture.  While public expenditures on agriculture have been increased over the past 15 years, there is vast scope to improve both their efficiency and effectiveness.

“There remains a need to look closely at ways to improve public spending in agriculture to ensure the promotion of a non-copper economy and improved rural livelihoods. Low agriculture productivity is a key impediment to poverty reduction and has knock on effects in terms of gender disparities, land degradation and rapid deforestation,” said Ina-Marlene Ruthenberg, World Bank Country Manager for Zambia.