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Zambia Economic Brief, June 2015, Issue 5 : Making Mining Work for Zambia

MONETARY POLICY DEFICIT SOCIAL COSTS CAPITAL MARKETS FISH BASIS POINTS OIL PRICE ECONOMIC GROWTH DEPOSITS ENVIRONMENTAL PROTECTION MARKET DISTORTIONS ENVIRONMENTAL DEGRADATION FISCAL DEFICITS INTEREST DOMESTIC BORROWING FOREIGN EXCHANGE MARKET EXPECTATIONS GOVERNMENT SPENDING PRODUCERS EMERGING ECONOMIES ENVIRONMENTAL COSTS EXCHANGE HEAVY METALS ECONOMIC DEVELOPMENTS BOND SPREADS BALANCE OF PAYMENTS FINANCIAL RESOURCES LABOR FORCE DOMESTIC MARKET DEVELOPING COUNTRIES EMISSIONS GOVERNMENT BORROWING EXPORTERS REVENUES FISCAL POLICY BONDS INCENTIVES MODELS TAX LONG-TERM INVESTMENT FOREIGN EXCHANGE MARKETS RESERVE CENTRAL BANKS CURRENT ACCOUNT SURPLUSES INTERNATIONAL BANK INFLATION PENSION AUDITS BUDGET CENTRAL BANK ECONOMIC ACTIVITY TRADE BALANCE OIL PRICES EXPLOITATION LABOR COSTS OIL CURRENCY AIR POLLUTION RESERVE BANK CAPITAL FORMATION IMPORT COSTS EXCHANGE RATES TRADING OPTIONS INTEREST RATES SOVEREIGN BOND OPEC MARKETS DEBT RETURN LAND DEGRADATION DEFICITS INFLATION RATE POLLUTION FORESTRY ECONOMIC POLICIES DIVIDENDS REGULATORY CAPACITY CAPITAL INVESTMENTS METALS CASH TRANSFERS SUBSIDIES FINANCE CERTAIN EXTENT EFFICIENCY FISHING TAX POLICIES TAXES FISCAL DEFICIT GOVERNMENT SECURITIES RESOURCES AUCTIONS EQUITY INVESTORS PRODUCTIVITY GROWTH CONSUMPTION COPPER SMELTERS FEDERAL RESERVE INTEREST PAYMENTS GOOD FEDERAL RESERVE BANK WAGES INTERNATIONAL TRADE ENVIRONMENTAL MANAGEMENT VALUES MARKET PRICES FUTURE CREDIT BUDGETS ENVIRONMENTAL IMPACTS MINES CONTRACT EXPENDITURES PROPERTY DECISION MAKING ECONOMIC RENTS TAX RATES T-BILL T-BILL RATE MARKET ENVIRONMENT SULFUR DIOXIDE EMISSIONS FOREIGN EXCHANGE MONETARY POLICIES STREAMS TERMS OF TRADE SECURITIES TAX REVENUE CAPITAL GOODS INFLATION RATES CURRENCIES GOVERNMENT DEBT ECONOMIC DEVELOPMENT TRADE CURRENCY DEPRECIATION LAND GOODS DRINKING WATER INVESTMENT BOND COMMERCIAL BANKS SHARE POVERTY FINANCIAL MARKETS GLOBAL INTEREST WATER POLLUTION REVENUE EMPIRICAL EVIDENCE PRIVATE CONSUMPTION SULFUR DIOXIDE INVESTMENTS PENSION FUND ARSENIC PRODUCTION QUANTITIES EXCHANGE RATE INSTRUMENT PROFITS POLICY INSTRUMENTS ACID RAIN CAPITAL INVESTMENT ENVIRONMENTAL COMMODITY PRICES ARREARS PRICES PRODUCTION COSTS ECONOMIES
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World Bank, Washington, DC
Africa | Zambia
2015-06-23T20:58:04Z | 2015-06-23T20:58:04Z | 2015-06-01

After several years of strong economic performance, Zambia now confronts several important challenges that must be managed carefully to ensure sustained and inclusive growth in the future. On the one hand, the economy grew by an estimated 5.5–6.0 percent in 2014, somewhat above the average for African economies. Monthly copper production increased by an average of 8 percent during the second half of 2014, reversing the sharp slide in early 2014. Inflation fell to 7.2 percent in March and April, helped both by falling world oil prices and by the Bank of Zambia’s monetary tightening. In the first half of 2015, the authorities adjusted several key economic policies to respond to serious problems: revising rules on VAT refunds in February, announcing a new mining fiscal regime in April, and raising fuel prices in May so that the government could recover import costs. On the other hand, the kwacha has come under renewed pressure. It lost 17 percent of its value against the U.S. dollar from December 2014 through the end of March 2015. Since then it has recovered somewhat, but foreign exchange markets remain volatile. Interest rates have been rising since September 2014, due in part to increased government borrowing and in part to steps taken by the Bank of Zambia to tighten credit. Over the medium term, growth should hold steady in 2015 and then accelerate to around 6–7 percent per year in 2016–2018. Although inflation is expected to rise towards the end of 2015, it should resume falling in 2016. Low commodity prices, a more stable exchange rate, and adequate local harvests would help contain inflationary pressures and boost real disposable incomes. The resulting pick-up in private consumption, coupled with increasing copper exports, should help strengthen growth prospects.

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