This is a three slide economic profile for Zambia. It looks at the main macroeconomic indicators and provides an evaluation of the main barriers to growth and development facing this commodity rich country. Can Zambia - which has reached lower middle income status - successfully transition away from an economy that is heavily reliant on copper mining?

1. Economic Growth and Development in Zambia
Key Macro Data (2015 or latest)
Latest annual GDP
Growth (%)
3.0%
(7% target)
GDP or GNI per capita
(US $, at PPP)
$3734
Inflation (%) 12% (rising)
Unemployment rate
(% of labour force)
13%
Fiscal balance
(% of GDP)
-7%
Govt debt (% of GDP) 60%
Yield on 10-Yr Govt
Bonds (Per Cent)
9% yield on
Euro Bond
Investment
(% of GDP)
32%
Gross national savings
(% of GDP)
31%
Background Information
Currency unit Kwacha
Exchange rate system
Managed
floating
Policy interest rate 19%
Member of a Regional
Trade Agreement
SADC and
COMESA
Current account
balance (% of GDP)
-6%
Main corporate tax rate
(Per Cent)
35%
Competitiveness rank 96/144
Corruption Perception
Ranking
85/185
Ease of Doing Business
Ranking
111/189
External Debt
(% of GDP)
38%
Aspects of Development
Latest HDI ranking 139/188
Income inequality HDI
adjustment
HDI score
falls 34%
Gender inequality HDI
ranking
132/155
% of population living in
extreme poverty
74%
Life Expectancy at birth
(years)
60 years
Gini coefficient (Latest
published estimate)
0.57
Inward FDI (% of GDP) 5-6%
Remittances (% of GDP) n/a
Aid (% of GDP)
< 5% of
GDP

2. Contextual Background on the Zambian Economy
Economic Structure
Share of GDP by value added (% of GDP)
Primary: 9
Industrial: 32
Services: 59
Main export industries (+ major firms)
1/ Raw and refined copper
2/ Sugar
3/ Cobalt
Key risks to sustainable growth
1/ Falling terms of trade as copper prices fall
2/ Closure of copper mines / rising unemployment
3/ Huge infrastructural deficit, especially in
transportation and energy (power shortages)
4/ Twin deficit – rising fiscal and current account
deficit as export revenues fall
Development and Growth Issues / Policies
3 factors limiting development progress
1/ Landlocked with poor infrastructure
2/ Very high extreme poverty & inequality
3/ Low productivity subsistence farming
4/ 80% of people are in vulnerable employment
3 policies used to improve the supply-side
1/ Creation of 2 Special Economic Zones
2/ Reduce the complex system of farm subsidies
3/ Incentives to grow mobile banking services
Long term challenges facing this country
Challenge 1: Improve level of human capital to
help make growth more inclusive / sustainable
Challenge 2: Diversify out of copper mining
Challenge 3: Increase government revenue and
reduce scale of distortionary state subsidies

3. Evaluating Main Strengths and Weaknesses for Zambia
Competitive Strengths
1/ Rich natural factor endowment (copper & emeralds)
2/ Young workforce (half pop are under 15yrs old)
3/ Now a middle income country – GNI per capita
increased by about 69% between 1980 and 2014.
4/ Progress in improving health outcomes /HDI rank is
higher than average for Sub Saharan Africa
5/ Functioning democracy with political stability
Other Notes
• Zambia has become a favoured venue for inward
investment worth 5-6% of GDP annually with much
coming from China.
• Country still has strong long-run growth potential
given it’s natural resource endowment
• Zambia has a functioning democracy but economic
management is weak and Zambia has not successfully
used revenues from copper mining/exporting into
establishing a diversified industrial base –
manufacturing is shrinking as % of GDP
• Can Zambia survive what many believe to be the end
of the global commodity super price cycle?
Main Weaknesses in their Economy
1/ Vulnerable to global slowdown / Zambia does not
have a stabilisation fund / wealth fund to draw upon
2/ High secondary school drop-out ratio – disparity
between expected and mean years of schooling
3/ Low tax revenues / big tax avoidance issues
4/ Weak currency / growing fiscal & BoP deficits
5/ Finance is under-developed / very high interest rates
of 30-40% for small businesses / farmers
Other Useful Contextual Knowledge
• 40% child labour (14% in developing countries)
• Zambia is too dependent on hydro-electricity – much
goes to power the copper mines. Drought is leading
to power shortages and affecting farming
• The big threat facing Zambia is stagflation i.e. a sharp
reduction in economic growth accompanied to
double-digit rates of inflation fuelled by a severe
depreciation of the currency.
• Youth under employment is also a huge issue
• Zambia’s economic growth has not translated into
significant poverty reduction