1. HDI In Focus: Overview on Zambia
In 2012 Zambia was reclassified as a lower-middle-income country
But it remains one of the poorest in the world, ranked 141 of 187 countries in the latest human development index (HDI)
Zambia has achieved real GDP growth of more than 6% in recent years
Agriculture accounts for 10% of GDP and remains the main source of jobs
Zambia attracted inward FDI of $1.8bn in 2014 (6% of their GDP)
Copper mining accounts for 70% of Zambian exports
The country has a low level of economic complexity
China is their main export market with 25% of Zambian exports
Zambian government introduced a 9% mining royalty tax in 2015
The current account surplus ( ) is now turning to a rising deficit
Zambian government now has a large fiscal deficit & public debt is rising
External debt is low – around 25% of GDP – low by African standards
Zambian exports suffer from lower copper prices but Zambia is also a net importer of oil so lower global oil prices help their balance of payments

2. World Bank Report on Zambia (June 2015)
“With strong economic growth in the last decade traceable to significant investments in Zambia’s copper mining sector, Zambia has now reached lower– middle-income status.”
“Despite this income growth, however, more than 60 percent of its people live below the national poverty line.”
“In addition, a century of mining has imposed environmental and public health costs on the country and its people.”
This World Bank quote is a useful reminder of some of the externalities from countries experiencing rapid economic growth. Zambia is a good example of this.

3. Slower GDP Growth Limits Gains in Standard of Living
Zambian government’s GDP growth target = 7% pa

4. 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% (deficit)
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 (High)
Inward FDI (% of GDP)
5-6%
Remittances (% of GDP)
0.5%
Aid (% of GDP)
< 5% of GDP

5. 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 and tax revenues decline
Development and Growth Issues / Policies
3 factors limiting development progress
1/ Landlocked with poor infrastructure
2/ High extreme poverty & rural/urban inequalities
3/ Low productivity in rural subsistence farming
4/ 80% of people are in vulnerable employment
3 policies used to improve the supply-side
1/ Special Econ Zones (0% tax on profits for 5 years)
2/ Reducing the complex system of farm subsidies
3/ Incentives to grow mobile banking services
Long term challenges facing this country
Challenge 1: Improve the level of human capital to help make growth more inclusive / sustainable
Challenge 2: Diversify out of copper mining and attract investment into farming & tourism & SMEs
Challenge 3: Increase government revenues and reduce the scale of distortionary state subsidies

6. Evaluating Strengths and Weaknesses for Zambia
Competitive Strengths for Zambia
1/ Rich natural factor endowment (copper & emeralds)
2/ Young workforce (half pop are under 15yrs old)
3/ Now a middle income country – real 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 foreign investment worth 5-6% of GDP annually with much of this 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 the Zambian 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 / high interest rates of 30-40% for small businesses / farmers limits enterprise
Other Useful Contextual Knowledge
40% child labour (14% in developing countries)
Zambia is 95% dependent on hydro-electricity – much goes to power the copper mines. Drought is leading to power shortages with rolling blackouts.
The big threat facing Zambia is stagflation i.e. a sharp reduction in GDP 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

7. HDI Progress: Education Indicators for Zambia - 2014
Mean years of schooling
Expected years of schooling (note mismatch with mean years) 13.5
Adult literacy rate (% aged 15 and older) %
Population with secondary education (% aged 25 and above) 35%
Primary enrolment (% of children of primary school age) 114%
Secondary enrolment (% of children of secondary school age) 101%
Primary school dropout rates (% of primary school cohort) 47%
Pupil-teacher ratio
Expenditure on education (measured as a % of GDP) 1.35%
Significant progress has been made in Zambia in raising the expected years of schooling available to the population. But … in evaluation…
Only one third of adults have experienced some form of secondary education
The primary school drop-out rate is nearly 50%
The pupil teacher ratio remains high and spending on education is less than 1.5% of GDP. Teacher quality is variable and there are hundreds of thousands of aids orphans in Zambia – a key cause of the 40%+ child labour ratio

8. HDI Progress: Health Indicators – Zambia - 2014
Life expectancy at birth
Infant mortality rate (per 1000 live births) 56
Under five mortality rate (per 1000 under five children) 89
Infants lacking immunization - % of one year olds 14%
Infants lacking immunization - % of one year olds, Measles 17%
HIV prevalence (% ages 15-24), female 4.6%
HIV prevalence (% ages 15-24), male %
HIV prevalence (% ages 15-49), total %
Adult mortality rate (per 1000), female 377
Adult mortality rate (per 1000), male
Age standardized obesity rate (% of ages 20 and older) 4.2%
Health expenditure (% of GDP) %
Zambia has made big progress in raising life expectancy and cutting child mortality. Immunization rates have climbed & spending on health as a % of GDP is high relative to most other sub-Saharan countries and much higher than in education

9. Life Expectancy at Birth (Years) in Zambia
Male life expectancy remains well below the figure for females
Why is rural life expectancy in Zambia higher than for people in urban areas?

10. Gender Indicators – Zambia - 2014
Gender Inequality Index
Maternal mortality ratio (deaths per 100,000 live births) 440
Adolescent birth rate (births per 1,000 women aged 15-19) 125
Share of seats in parliament (% held by women) 11%
Population with secondary education, female %
Population with secondary education, male %
Labour force participation rate, female %
Labour force participation rate, male %
HDI, female
HDI, male
Gender inequality became central to the HDI data set from 2010 onwards when a gender-inequality adjusted HDI figure was first published.
The female labour force participation rate in Zambia is high due to dependence on farming. Maternal and infant mortality rates remain very high and only a quarter of females have an education to secondary level.

11. Income / Command over Resources – Zambia - 2014
Gross national income (GNI) per capita (2011 PPP$) 2,898
GDP per capita (2011 PPP$) 2,990
Gross fixed capital investment (% of GDP) 23%
Domestic credit provided by the banking system (% of GDP) 18%
External debt stock (% of GDP) 25%
Measuring the extent of poverty in Zambia
Population in multi-dimensional poverty (%) 63%
Population living below $1.25 a day (extreme poverty) (%) 74%
Share of working poor, living on below $2 a day (%) 76%
In 2015 the World Bank revised their benchmark for the number of people living in extreme poverty. New data will count the number of people living on less than $1.90 per day at PPP.

12. Inequality Measures – Zambia - 2014
Quintile ratio
Palma ratio 4.8
Gini coefficient
Quintile ratio
This is the ratio of the average income of the richest 20% of the population to the average income of the poorest 20% of the population
Palma ratio
This is the ratio of the richest 10% of the population's share of gross national income divided by the poorest 40%'s share
Gini coefficient
A Gini index of 0 represents perfect equality, while an index of 1 implies perfect inequality. Zambia has a very high level of income inequality measured this way
Source: UN HDI report 2014