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 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

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

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