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Begin New Search Topic Economic Growth Political Geography Africa Content Type Working Paper Publishing Institution Zambia Institute for Policy Analysis and Research (ZIPAR) Publication Year within 10 Years

1. A Review of Pillar I & II of Zambia’s Economic Stabilisation and Growth Programme 2017-2019

Author:
Florence Banda-Muleya, Shebo Nalishebo, Mbewe Kalikeka, Nakubyana Mungomba, Ignatius Masilokwa, and Caesar Cheelo
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The economic crisis of 2015 destabilised Zambia’s economic performance. The depreciation of the Kwacha and its pass-through effects led to inflation of as high as 22% and growth, at 2.9%, was far below the 5% target. The overall Budget deviation was 15% of Parliamentary appropriations in 2015, disrupting planned activities and attainment of set macroeconomic objectives. There were huge variations between what the consequent national Budgets committed to do and what they actually did. To fix this and nudge the country back towards high sustained economic growth, the Economic Stabilisation and Growth Programme (ESGP) was crafted in 2017. The five-pillar plan aimed to ensure prudent fiscal management by providing a system of accountability and a standard against which results could be measured, among other things. The aim of this paper is to review the ESGP, particularly, its performance in 2018. The paper sets out to understand how well Zambia faired in implementing the ESGP as well as to highlight the broader fiscal trends recently. It ultimately seeks to make recommendations about how Zambia can revive its path to economic stability and growth. The paper focuses tightly on the first two pillars of the ESGP, i.e. (i) restoring budget credibility; and (ii) enhancing domestic resource mobilisation and refocusing public expenditure. The remaining three pillars are slated to be reviewed in the second half of 2019.
Topic:
Budget, Finance, Economic Growth, and Economic Stability
Political Geography:
Africa and Zambia

2. Reversing Zambia’s high risk of debt distress

Author:
Florence Banda-Muleya and Shebo Nalishebo
Publication Date:
08-2018
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
A load of unsustainable debt hangs heavy over Zambia. Zambia is part of a list of 25 low income countries considered at high risk of debt distress in 2018. Government’s efforts to reduce the country’s infrastructure gap as well as bring down poverty and inequality have resulted into large spending overruns, a growing subsidy bill and a substantial public sector wage bill over the last five years. Alas, domestic revenues remained low and stagnant. So Government resorted to massive external borrowing to finance arguably unsustainable expenditure. This approach to spending pushed borrowings to about 59% of GDP as at end of 2017, which is in the territory of unsustainable debt levels. In October 2017, the IMF issued a red flag that Zambia was at high risk of debt distress, implying that the country was likely to breach the thresholds for debt and debt service indicators and, should it continue on the same trajectory, it would likely default on its debt service obligations. This high debt has consequences for growth and poverty reduction efforts. Increased domestic borrowing by Government from October 2015 resulted in reduced lending to the private sector as businesses and Government competed for credit, and thereby hampered economic growth. Further, with interest payments reaching 23% of domestic revenues and personal emoluments as high as 54% of domestic revenues in 2017, other priority spending as well as spending on social protection were crowded out, thereby hampering efforts to reduce poverty. This was despite the removal of fuel and electricity subsidies in 2017, whose savings did not result in a corresponding increase in spending towards poverty reduction and empowerment programmes. Additionally, the high debt has made future borrowing more risky and more expensive, limiting opportunities to borrow, to invest or restructure debt going forward. Zambia’s surging public debt is largely skewed towards costly commercial external debt due to issuing Eurobonds and increased export and suppliers’ credit. This poses significant repayment and currency risks. The bullet repayment structure of the first two Eurobonds means that the principal will have to be repaid at the end of the term of each loan in 2022 and 2024. Significant risks are thus faced as the country is ill-prepared to make such lump sum payments. Further, interest payments are payable in US dollars, so when the local currency depreciates substantially (as it did in 2015), the cost of servicing this debt increases. Moreover, while average interest rates on Eurobonds seem low at around 8%, the effective borrowing costs (interest rate plus average annual rate of depreciation) averaged 26% in 2016.
Topic:
Debt, Development, Infrastructure, Economic Growth, IMF, and Public Debt
Political Geography:
Africa and Zambia

3. The Expansion of Regional Supermarket Chains: Implications for local suppliers in Zambia

Author:
Francis Ziba and Mwanda Phiri
Publication Date:
03-2017
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The last two decades have seen rapid economic growth in Zambia and the proliferation of foreign supermarket chain stores. However, this growth has translated into neither significant job creation nor significant poverty reduction. Furthermore, while the expansion of supermarket chains in Zambia has continued, local processing firms’ participation in supermarket value chains remains limited. This paper assesses the hindrances to local processing firms’ participation in supermarket value chains and how those firms’ participation might stimulate growth through regional trade. Our results show that local processing firms’ participation in regional supermarket value chains is constrained by a number of factors that pose either strategic or structural barriers to entry.
Topic:
Economic Growth, Private Sector, Retail, Regional Economy, and Value Chains
Political Geography:
Africa and Zambia