Overview

Zambia has had a long period of political stability. With strong growth in the last decade the country has reached lower middle income status. Investor confidence has been high as evidenced in the successful issue of two Euro bonds.

Independent since 1964, Zambia has experienced five successful multiparty elections since the return to multiparty politics in 1991. The latest elections in September 2011, were peaceful, and further strengthened Zambia’s democratic credentials. Zambia has British–style parliamentary democracy. Government consists of the President and the 158-seat national assembly. Elections are held every five years and the presidency is limited to two, five year terms. There are also traditional chiefs and their headmen, who still command a great deal of respect but hold little decision-making power except when it comes to land distribution.  

Zambia has had a decade of rapid economic growth. A combination of prudent macroeconomic management, market liberalization policies, and steep increase in copper prices helped drive investments in the copper industry and related infrastructure to achieve an average annual growth of about 6.4% during the last decade. Though the economy is dependent on copper, the agriculture sector is the major employer (70% of the population). However, the sector’s potential to contribute to the country’s development remains largely underexploited.

The recent rebasing of the national accounts has given a new perspective to the structure of the economy. The Central Statistical Office of Zambia has just finalized the rebasing of the national accounts to 2010 (from 1994). Preliminary estimates put the economy at 25% larger than in the old accounts. Mining, construction and trade gained more prominence as agriculture declined.

However, Zambia’s economic growth has not translated into significant poverty reduction. Sixty percent of the population lives below the poverty line and 42% are considered to be in extreme poverty. Moreover, the absolute number of poor has increased from about six million in 1991 to 7.9 million in 2010, primarily due to population growth. The urban picture is far better than the rural: in the Copperbelt and Lusaka provinces, for example, poverty incidence is fairly low (22% and 34% respectively), whereas in the rest of the country, which is dominated by agriculture, poverty rates are greater than 70%.

The country has defined its own development agenda through its Vision 2030 and the Sixth National Development Plan (SNDP) which has recently been revised. The Plan is organized around the theme of “broad based wealth and job creation through citizenry participation and technological advancement.” Specific development goals include promoting inclusive growth, fostering a competitive and outward-oriented economy, significantly reducing hunger and poverty, and reaching middle income status.

Accelerating growth and reducing poverty will necessitate increasing the competitiveness of the Zambian economy by reducing the cost of doing business and ensuring that the rural economy, upon which much of the population depends for its livelihood, contributes meaningfully to overall growth. Despite vast potential and stated commitments to diversification, the mining sector continues to dominate the economy.

The World Bank

Well before attaining its independence, Zambia began to receive World Bank support in 1955. As of April 2014, International Development Agency’s (IDA) net commitments in Zambia totaled $712.2 million for eleven active projects (nine national for a total of $622.2 million and two regional for a total $90.0 million), supporting programs in agriculture, infrastructure, energy, the environment, and human development. Agriculture continues to be the largest area of support. The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) are also providing support for Zambia’s development.  

The World Bank Group’s strategy for the four years (2013-2016) was approved by the Bank’s Board in March 2013. The strategy is aligned with the government’s development priorities. In a country that displays both low income and middle income characteristics, the strategy supports three objectives that speak to the dual nature of Zambia’s development challenges and opportunities:

  • Reducing poverty and the vulnerability of the poor
  • Improving competitiveness and infrastructure for growth and employment
  • Improving governance and strengthening economic management.  

In transitioning the WBG from primarily a lending to a solutions institution, the Bank is giving equal importance to both funding and analytical work.  Analytical and Advisory (AAA) work consists of reports, policy notes, non-lending technical assistance, conferences, workshops, country dialogue and other activities that generate knowledge through direct engagement with the client. It is through the AAA work that the Bank's global knowledge and expertise is adapted to regional and local circumstances. The analytical work is designed to help Zambia improve its policy environment and accelerate its development efforts.

Some of the significant work recently done in this area is the South to South dialogue in which the Bank facilitated a peer to peer learning experience between Zambia and Chile to better understand how mineral wealth can be transformed into government revenues and how the financial resources can help to promote human development and alleviate poverty.

The Bank has also helped in the development of legislation on agricultural marketing, strengthening government capacity and reducing the cost of doing business in Zambia.

Last Updated: Apr 09, 2014

World Bank Assistance Strategy to Zambia

The World Bank’s Country Partnership Strategy (CPS) for Zambia for fiscal 2013-2016 is closely aligned with the Zambian government’s Vision 2030 and Zambia’s National Development Plans (ZNDP). The plans are organized around the theme of broad based wealth and job creation through citizenry participation and technological advancement. Specific development goals are to foster a competitive and outward-oriented economy in order to significantly reduce hunger and poverty and reach middle income status.

The CPS has two areas of special emphasis. First, because of the potential fiscal windfall coming from the boom in copper export prices, the CPS supports improved expenditure management and effective use of revenue in collaboration and monitoring with the government and local stakeholders, to benefit as many households as possible.

Second, because of the significant gaps between urban and rural areas, and the need for increased access to regional markets, the CPS supports a program of investments in infrastructure that will increase economic opportunities for all Zambians through improved connectivity and integration, resulting in increased competitiveness.

Currently, infrastructure (roads, water and electricity), accounts for about 60% of the Bank’s portfolio, and the average life of a project is 3.8 years. The other sectors have continued to decline and their shares are currently as follows: environment (11 percent), agriculture (10 percent), finance and private sector development (eight percent), the public sector (eight percent), and Human Development (five percent). Grants now account for about 18 percent of the current total net commitments while credits are at 82%.

Partners

The World Bank Group’s strategy adheres to the principles agreed with other Cooperating Partners supporting Zambia development efforts as articulated in the Joint Assistance Strategy for Zambia (JASZ) and comprises highly selective targeted interventions that maximize the impact of government’s development efforts.

Malaria Booster Project

The International Development Association (IDA) supported the government’s national malaria strategy (2006-2011) through the Zambia Malaria Booster project. Malaria is the leading cause of morbidity and the second highest cause of mortality in Zambia, particularly for women and children. The disease accounts for 50,000 deaths a year and almost half of all in- and out-patient hospital visits. A decline of 29 percent in malaria cases for children under the age of five and a decline by 33% in malaria-related under-five deaths have been recorded as a result of Malaria booster activities. A decline for all age groups was 31% in malaria cases and 37% in malaria-related deaths. Key activities included indoor residual spraying, which increased from 27% to 43%, the percentage of children under five years of age who sleep under a treated bed net from 30% to 41% and the percentage of pregnant women who receive a complete course of intermittent presumptive treatment for malaria from 45% to 66%. Overall, the project contributed substantially to the 30% reduction in child mortality in Zambia.

Thanks to this success, an additional US$6.85 million was donated from the Russian Federation and the Government of Norway awarded Zambia an additional US$11 million for Millennium Development Goals (MDGs) focused on reducing child mortality (MDG Four) and improving maternal health (MDG Five) through results-based financing (RBF) in 2008. The remarkable performance of the National Malaria Control Program was key to obtaining this additional financing.

Regional Trade Facilitation

Zambia has committed to implementing policy reforms to enhance trade along the North-South Corridor and other corridors. It is important that implementation of trade facilitation and administrative reforms, especially at border crossings, be accelerated in order to achieve goals of the North-South Corridor Conference in Lusaka in April 2009.

Last updated October 2013

Zambia’s economy grew at 5.7% per annum over the last decade with the country being among the 10 fastest growing economies of Sub-Saharan Africa in 2012. This has enabled it to attain lower middle income country (MIC) status with a nominal per capita income of US$1,299 (2011). Investor confidence has been high as evidenced by the successful issue of the US$750 million Euro bond. Prospects for 2013 look encouraging and the economy is expected to register another year of growth. However the economy remains largely undiversified and mainly dependent on copper with economic activity concentrated mostly in the urban areas. Poverty, particularly in the rural areas remains stubbornly high. The effect of economic growth on overall poverty reduction has been small, because most of the benefits of growth have accrued to those already above the poverty line.

Mining, construction and financial services drove the growth and did little to create jobs and expand opportunities beyond the small labor force employed in these industries. The urban-centered growth also did not generate better incomes, health, nutrition and key services for the majority of Zambians living in the rural areas and dependent on agriculture. Reducing poverty is the greatest development challenge for Zambia. Zambia therefore needs to press ahead to diversify its economy with particular focus on agriculture to achieve inclusive growth.

Government development plan and Country Partnership Strategy alignment

The new government, in power since September 2011, aims for “a better Zambia for all” and has identified poverty reduction, jobs creation and improving governance as its main priorities. The Sixth National Development Plan identifies the following overarching objectives; to accelerate infrastructure development, economic growth and diversification, promote rural investment, accelerate poverty reduction, and enhance human development. The Country Partnership Strategy 2013-2016 (CPS) is aligned to the government’s development priorities. In a country that displays both low income and middle income characteristics, the CPS will support three objectives that speak to the dual nature of Zambia’s development challenges and opportunities; reducing poverty and the vulnerability of the poor, improving competitiveness and infrastructure for growth and employment and improving governance and strengthening economic management.

Agriculture Sector

Government recognizes agriculture as a principle sector for poverty reduction and for promoting economic diversification. Increased agricultural productivity will not only improve the income of women as the majority (68%) of those who are economically active work in that sector, but also the nutritional intake of children. Bank interventions include the Livestock Development and Animal Health Project to improve the productivity of key livestock systems for female and male smallholder producers. The Irrigation Development and Support Project increases yields per hectare and value of products and commercialization of smallholder agriculture projects that support infrastructure development, market linkages, access to electricity and better management of water resources and contribute to agriculture development. A regional project involving Malawi, Mozambique and Zambia will strengthen regional approaches to agricultural technology generation and dissemination by establishing regional centers of research leadership.

Health Sector

The Zambian governments instituted health sector reforms, to provide cost-effective and quality health services to the population. The reforms centered on the delivery of primary health care through a decentralized health system. Malaria control has been impressive, but achieving the health-related MDGs by 2015 remains a key development challenge, particularly among children. 

Forty seven percent of children under-five years are stunted. Inadequate dietary intake resulting from suboptimal maternal and infant feeding practices, diarrheal diseases, acute respiratory infections and the heavy burden of malaria are some of the causes of this situation. The Bank is supporting the government to strengthen health systems by scaling up activities to expand access to malaria prevention and treatment. The Bank is also supporting improving the capacity of the Ministry of Health to implement the National Health Care Waste Management Plan and the capacity of local communities to effectively prevent, control and treat malaria based on community demand-driven interventions. As part of the Malaria Booster Project, the Bank is also supporting innovative ways of improving the supply chain system of essential medicines by introducing Information Communication Technology (ICT) for health initiatives in the public sector. A follow-on intervention in the health sector focused on health system strengthening to accelerate improvement in maternal and child health outcomes

Transport Sector

Since 2003, the government has been implementing a ten-year road development program, known as ROADSIP II, partially financed by the World Bank and partners. The government recently announced a further paved road construction program, Link 8000, planned for implementation in the next five-to-10 years in which it is investing a significant amount of its own resources. However, connecting remote rural areas still remains a challenge. The Bank, through the performance-based road contracting is helping to remove the road infrastructure gap and allow meaningful agricultural development to take place. The rail and road network also needs attention as service has continued to deteriorate. The railway concession was cancelled in September 2012, with commitment from the government to recapitalize the railway service.

Energy Sector

Inadequate electricity supply is a constraint to growth. The mining industry accounts for about 50% of national electricity consumption. The overall national electrification rate is 23%, with 47% of the population in urban and peri-urban areas, and only three percent in rural areas having access to electricity.

The electrification strategy focus is to open the transmission network to private electricity providers in addition to the state-owned ZESCO, improving its operational and financial performance. At the same time, the strategy focuses on phasing out the need to subsidize new capital investments and raising electricity tariffs to total cost recovery levels in order to attract private investors to the market. The Bank interventions include Increased Access to Electricity Services Project to enhance access, the Transmission Line Reinforcement Project  to facilitate bulk power transmission to the improve reliability of power to satisfy the growing domestic power demands in Southern Province.

Mining Sector

The World Bank group is contributing to a Chamber of Mines and International Council on Mining and Metals collaborative study on nation-wide benefits to the economy from the mining sector. World Bank Group is also facilitating the Zambian Mining Local Content Initiative (ZMLCI) with representatives of the large-scale mining industry, the Zambian manufacturing and small and medium enterprises (SME) sectors and key government agencies to ensure that local manufacturers can become an integral part of mining supply chains, ultimately leading to greater industrialization in the country. The World Bank’s TA program for Zambia EITI is in its post compliance phase and is emphasizing these “beyond EITI” goals. Another trust fund is providing technical assistance to support the efficiency of mineral revenue collection and investment in Zambia. Through an EITI Trust Fund the World Bank will continue to support the capacity-building of non-state actors to engage in the EITI process.

Strengthened Climate Resilience

Frequent floods and droughts have cost Zambia an estimated US$13.8 billion over the past three decades. In its Sixth National Development Plan, the government is aware of the need to strengthen climate resilience. The Pilot Program for Climate Resilience (PPCR) Phase II  interventions are focused  in some of the poorest districts of Western and Southern Provinces, working at the community and district level through improved climate information, access to credit and weather-index insurance , better planning for floods and droughts, and diversification of sources of income to address the root causes of vulnerability. The PPCR is also promoting climate risk financing, including preparing the government to eventually receive financing from the Green Climate Fund and supporting the establishment of a  new inter-sectoral institutional framework to improve coordination amongst the growing number of climate change mitigation and adaptation projects in Zambia. 

Finance and Private Sector

Despite the general economic growth, Zambia’s investment climate remains challenging. The poor productivity of Zambian firms undermines their ability to generate income and jobs. The government therefore has two programs underway to improve the business environment: The Financial Sector Development Program addresses market infrastructure, competition, and broadens financial inclusion. The Private Sector Development Reform Program has begun to streamline business registration, licensing, cross border trade, labor reforms and facilitate micro, small and medium enterprises (MSMEs) to increase competition in tourism, agriculture and manufacturing. The WBG is assisting government regain the reform momentum. Further, Growth and Equity program is supporting improvement of financial literacy and consumer protection to build consumer trust in the financial sector and expand the confidence of households to wisely use financial services. 

Governance

The government has initiated numerous actions to improve governance including a new Anti-Corruption Policy, new Procurement Act, a multi-year program aimed at strengthening integrated financial management through a process of computerization, introducing a single treasury account, strengthening institutions of accountability, and drafting and passing the Freedom of Information legislation. However, numerous implementation challenges remain. Bank interventions include a Public Sector Reform Project, a Governance Partnership Facility (GPF) Trust Fund to improve governance through Improving Beneficiary Feedback in Bank Project, Coalition B and Citizenry monitoring and Building Public Interest Media.

Last updated October 2013


LENDING

Zambia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments