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7TH ZAMBIA ECONOMIC BRIEF
22 June 2016
Dr. Gregory Smith
Macroeconomics & Fiscal Management Global Practice
BEATING THE SLOWDOWN:
MAKING EVERY KWACHA COUNT
DATA & INFORMATION FLOWS ARE BETTER
WBG ZAMBIA 2
“The availability of data has improved in 2016”
HUGE BODY OF KNOWLEDGE
WBG ZAMBIA 3
TOUGH CONDITIONS FOR GROWTH
WBG ZAMBIA 4
“Provisional estimates for 2015 from government suggest growth of 3.2%, a
slowdown from the average of 7.4% between 2004 and 2014.”
WHAT DRIVES AND WHAT SLOWS GROWTH?
WBG ZAMBIA 5
WHAT DRIVES GROWTH?
WBG ZAMBIA 6
“Services had provided a
important boost to growth
over the past decade but
the sector’s expansion
slowed in 2014 and
2015”
COPPER EXPORTS DOWN AS THE PRICES FALLS
WBG ZAMBIA 7
“Copper prices have been falling since a peak in 2011”
“Copper production
rose slightly in 2015,
but the value of their
export in US$ fell
31% because of lower
prices”
PUBLIC EXPENDITURE HAS EXPANDED
WBG ZAMBIA 8
“Over the past 5 years
expenditure has gone
up by 13.8% a year
in real terms”
PRESSURE ON THE BALANCE OF PAYMENTS
WBG ZAMBIA 9
“Zambia relies on
copper for 77% of its
exports”
“Many Zambian goods
require imported
inputs”
KWACHA UNSETTLED
WBG ZAMBIA 10
“The Kwacha has
depreciated 62%
between January 2015
and end-May 2016:”
PRESSURE ON THE CURRENCY = INFLATION
WBG ZAMBIA 11
“Inflation has spiked
and remained above
20% for 6 months”
FOOD PRICES HIT THE POOREST HARDEST
The CSO data April 2015 to April 2016:
•Roller mealie meal (+30%)
•Maize grain (+35%)
•Tomatoes (+114%)
•Onions (+38%)
•Dried beans (+30%)
•Sugar (+35%)
•Table salt (+37%)
•Hammer mill charges (+45%)
WBG ZAMBIA 12
ZAMBIA OUTLOOK
2016 GDP growth close to 3.0%
Improving in 2017 (4.2%) and again in 2018 (5.0%).
Underpinned by five main assumptions:
i. Copper prices remain low
ii. Fiscal pressures eased
iii. Market confidence via an IMF program
iv. Power crisis improves
v. 2015-16 harvest is better.
WBG ZAMBIA 13
LIVING CONDITIONS SURVEY 2015
WBG ZAMBIA 14
IDEAS FOR BEATING THE SLOWDOWN
WBG ZAMBIA 15
FUEL SUBSIDIES
Since December 2014, four price
adjustments but no changes since July 2015
despite kwacha depreciation.
Savings from fuel subsidies are estimated at
around US$36 million per month.
A review of the current price setting
mechanism is also a priority, as are efforts
to fix underlying problems associated with
the supply of fuel.
WBG ZAMBIA 16
POWER SECTOR FINANCIAL SUSTAINABILITY
Power crisis has impacted on all sectors of the
economy.
Savings of US 26 million per month could be realized
if the power crisis could be resolved.
Wider reforms and investment will ensure sustainable
supply in future.
WBG ZAMBIA 17
“A clear power strategy is needed, on tariffs and
far beyond”.
CASH TRANSFER PROGRAMME
Scaling-up the government’s Social Cash
Transfer programme would be a crucial
complement to any subsidy removal.
There remains a need to provide better
support to the poorest households.
WBG ZAMBIA 18
“There remains a need to protect the poor
during a transition”
PUBLIC EXPENDITURE REVIEW
A full review of what is being spent in key
sectors can help ensure that every kwacha is
put to productive use.
By comparing objectives and past spending
patterns, the allocation of expenditure can
be improved
WBG ZAMBIA 19
“Lessons to boost the efficiency of spending
can be found.”
THANK YOU
FOR LISTENING
WBG ZAMBIA 20
PLEASE DOWNLOAD
AND READ OUR
7TH ECONOMIC BRIEF

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Zambia 7th Economic Brief Slide Pack 22 June 2016

  • 1. 7TH ZAMBIA ECONOMIC BRIEF 22 June 2016 Dr. Gregory Smith Macroeconomics & Fiscal Management Global Practice BEATING THE SLOWDOWN: MAKING EVERY KWACHA COUNT
  • 2. DATA & INFORMATION FLOWS ARE BETTER WBG ZAMBIA 2 “The availability of data has improved in 2016”
  • 3. HUGE BODY OF KNOWLEDGE WBG ZAMBIA 3
  • 4. TOUGH CONDITIONS FOR GROWTH WBG ZAMBIA 4 “Provisional estimates for 2015 from government suggest growth of 3.2%, a slowdown from the average of 7.4% between 2004 and 2014.”
  • 5. WHAT DRIVES AND WHAT SLOWS GROWTH? WBG ZAMBIA 5
  • 6. WHAT DRIVES GROWTH? WBG ZAMBIA 6 “Services had provided a important boost to growth over the past decade but the sector’s expansion slowed in 2014 and 2015”
  • 7. COPPER EXPORTS DOWN AS THE PRICES FALLS WBG ZAMBIA 7 “Copper prices have been falling since a peak in 2011” “Copper production rose slightly in 2015, but the value of their export in US$ fell 31% because of lower prices”
  • 8. PUBLIC EXPENDITURE HAS EXPANDED WBG ZAMBIA 8 “Over the past 5 years expenditure has gone up by 13.8% a year in real terms”
  • 9. PRESSURE ON THE BALANCE OF PAYMENTS WBG ZAMBIA 9 “Zambia relies on copper for 77% of its exports” “Many Zambian goods require imported inputs”
  • 10. KWACHA UNSETTLED WBG ZAMBIA 10 “The Kwacha has depreciated 62% between January 2015 and end-May 2016:”
  • 11. PRESSURE ON THE CURRENCY = INFLATION WBG ZAMBIA 11 “Inflation has spiked and remained above 20% for 6 months”
  • 12. FOOD PRICES HIT THE POOREST HARDEST The CSO data April 2015 to April 2016: •Roller mealie meal (+30%) •Maize grain (+35%) •Tomatoes (+114%) •Onions (+38%) •Dried beans (+30%) •Sugar (+35%) •Table salt (+37%) •Hammer mill charges (+45%) WBG ZAMBIA 12
  • 13. ZAMBIA OUTLOOK 2016 GDP growth close to 3.0% Improving in 2017 (4.2%) and again in 2018 (5.0%). Underpinned by five main assumptions: i. Copper prices remain low ii. Fiscal pressures eased iii. Market confidence via an IMF program iv. Power crisis improves v. 2015-16 harvest is better. WBG ZAMBIA 13
  • 14. LIVING CONDITIONS SURVEY 2015 WBG ZAMBIA 14
  • 15. IDEAS FOR BEATING THE SLOWDOWN WBG ZAMBIA 15
  • 16. FUEL SUBSIDIES Since December 2014, four price adjustments but no changes since July 2015 despite kwacha depreciation. Savings from fuel subsidies are estimated at around US$36 million per month. A review of the current price setting mechanism is also a priority, as are efforts to fix underlying problems associated with the supply of fuel. WBG ZAMBIA 16
  • 17. POWER SECTOR FINANCIAL SUSTAINABILITY Power crisis has impacted on all sectors of the economy. Savings of US 26 million per month could be realized if the power crisis could be resolved. Wider reforms and investment will ensure sustainable supply in future. WBG ZAMBIA 17 “A clear power strategy is needed, on tariffs and far beyond”.
  • 18. CASH TRANSFER PROGRAMME Scaling-up the government’s Social Cash Transfer programme would be a crucial complement to any subsidy removal. There remains a need to provide better support to the poorest households. WBG ZAMBIA 18 “There remains a need to protect the poor during a transition”
  • 19. PUBLIC EXPENDITURE REVIEW A full review of what is being spent in key sectors can help ensure that every kwacha is put to productive use. By comparing objectives and past spending patterns, the allocation of expenditure can be improved WBG ZAMBIA 19 “Lessons to boost the efficiency of spending can be found.”
  • 20. THANK YOU FOR LISTENING WBG ZAMBIA 20 PLEASE DOWNLOAD AND READ OUR 7TH ECONOMIC BRIEF