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Zambia Economic Brief, December 2015 : Powering the Zambian Economy

MONETARY POLICY DEFICIT RISKS UNCERTAINTIES BUFFERS POWER PLANTS ECONOMIC GROWTH FISCAL BALANCES HYDROELECTRIC POWER STATIONS RESIDENTIAL CONSUMERS DRAG ON GROWTH FISCAL DEFICITS ELECTRICITY TARIFF POWER STATION FOREIGN EXCHANGE MARKET DEPRECIATION POWER STATIONS COMMON CURRENCY IMPORT VEHICLES POWER CRISIS ACTIVITIES INTEREST RATE GENERATION SURPLUS POWER SHORTFALL DEMAND FOR POWER WIND COSTS OF ELECTRICITY DOMESTIC MARKET FISCAL POLICY FLUORESCENT LAMP STABLE CURRENCY POWER SHORTAGES ENERGY GENERATION GAS SLOWDOWN COMPACT FLUORESCENT LAMPS PRICE PEAK DEMAND EXCHANGE MARKET OIL PRODUCTION MARKET ACCESS POWER SYSTEM MINERAL PRICES INFLATION BILLS POVERTY REDUCTION GENERATION CAPACITY TRADE BALANCE PETROLEUM OIL PRICES AGRICULTURAL COMMODITIES OIL CURRENCY POWER GENERATION DECELERATION IN GROWTH POWER SECTOR CURRENT ACCOUNT INFLATIONARY PRESSURES ENERGY SUPPLY ELECTRIFICATION OPTIONS INTEREST RATES WATER PRIVATE INVESTMENT ELECTRICITY SUPPLY INFLATION RATE DEFICITS STRUCTURAL REFORMS INTERNATIONAL DEBT EXPANSIONARY FISCAL STANCE DIRECT INVESTMENT TAX REVENUES DEBT SERVICE GROSS DOMESTIC PRODUCT THERMAL POWER COMMODITY PRICE POWER PRODUCERS CURRENT ACCOUNT POSITIONS FOREIGN CURRENCY PUBLIC INVESTMENT PRIMARY FUEL FISCAL DEFICIT GRADUAL DEPRECIATION ENERGY SAVINGS CURRENCY RISKS POWER GENERATION CAPACITY FEDERAL RESERVE TOTAL EXPORTS CLIMATE CHANGE DEMAND FOR ELECTRICITY BALANCE SLOW GROWTH FINANCIAL CRISIS HYDRO POWER UTILITIES FLUORESCENT LAMPS IMBALANCES POWER ELECTRICITY FOREIGN DIRECT INVESTMENT PRICE OF OIL CURRENT ACCOUNT BALANCE ENVIRONMENTAL IMPACTS DEMAND WIND ENERGY HYDROPOWER ELECTRICITY GENERATION ECONOMY PETROLEUM GAS CURRENT ACCOUNT DEFICIT ELECTRICITY TARIFFS FUEL PRICES RELATED SHOCKS TRANSMISSION LOSSES ACCESS TO GRID ELECTRICITY FOREIGN EXCHANGE SOLAR POWER EXPORTER INFLATION RATES ENERGY EFFICIENCY FISCAL IMBALANCES PRIVATE SECTOR INVESTMENT ACCESS TO ELECTRICITY ENERGY DEMAND CURRENCIES BILL ELECTRICITY GENERATION CAPACITY CURRENCY DEPRECIATION THERMAL POWER GENERATION HYDROELECTRIC POWER TURBULENCE GROWTH RATE INVESTMENT RISK UTILITY-SCALE SHORTFALLS GROWTH PERFORMANCE COAL TARIFF SUPPLY FUEL FISCAL BALANCE UNCERTAINTY ACCOUNT DEFICIT EXTERNAL DEBT INVESTMENTS RENEWABLE SOURCES RAPID GROWTH EXTERNAL FINANCING EXCHANGE RATE RELIABILITY OF SUPPLY PETROLEUM PRODUCTS FOOD PRICES FUEL PUMP DIESEL COMMODITY PRICES TRADING PARTNER DOLLAR EXCHANGE RATE PIPELINE POLITICAL INSTABILITY PRICES APPROACH GRID ELECTRICITY FISCAL POSITION POWER PLANT ECONOMIC CONDITIONS ECONOMIES EXTERNAL BORROWING CONSOLIDATION ENERGY
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World Bank, Lusaka
Africa | Zambia
2016-01-07T15:42:25Z | 2016-01-07T15:42:25Z | 2015-12

Zambia faces its toughest economic challenges in at least a decade. The economy has come under strain in 2015 as external headwinds and domestic pressures have intensified. The main domestic risks are threefold. Firstly, that the power crisis will worsen. Secondly, a deterioration of confidence in the economy, leading to further weakening of the currency and increased levels of inflation. Lastly, a bad harvest that serves to increase food prices and reduce rural and agricultural incomes, with the greatest impact falling on the poorest households. Commodity-exporting countries’ policy makers face increasing challenges across the globe. Zambia is no exception and must grapple with multiple challenges as the economy slows down. Strengthening the fiscal position and restoring fiscal buffers are necessary to increase confidence in the economy, reduce the need for costly borrowing, and build resilience against further exogenous shocks. Economic progress since 2000, driven by mining production and services, has substantially increased the demand for electricity in Zambia. Key to note is that an increase in tariffs to cost-reflective levels is necessary but not sufficient to increase private investment in electricity generation in Zambia. The new generation capacity and emergency measures for 2016 will help in mitigating the impact of the power crisis in the coming year, but global experience shows there is no substitute for effective planning. Particular efforts are needed to improve sector planning and the procurement processes for large power projects.

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