publication
Zambia Economic Brief: Raising Revenue for Economic Recovery in Zambia
Latest Issue: 
  • December 2016

Image

STORY HIGHLIGHTS
  • The latest economic brief shows that Zambia continues to face tough conditions for growth in 2016, with the country’s gross domestic product growth forecast to remain close to 3% in 2016
  • While the brief predicts growth to 4% in 2017, for a shift to faster and inclusive growth, efforts are needed to overcome a set of interlinked economic policy challenges
  • The brief recommends improving revenue collection to ensure a more sustainable fiscal position

LUSAKA, December 07, 2016 – Amid tough global conditions and domestic challenges, Zambia continued to face slower growth in 2016, according to the latest World Bank economic brief.

The analysis, Raising Revenue for Economic Recovery, highlights several challenges the country faced this year, including  power outages, tight liquidity, and limited appetite for economic reform during the first half of 2016. The brief also notes that implementation of the 2016 budget has been characterized by weak commitment control and deteriorating budget credibil ity. As revenues fell below target, the government did not make the necessary expenditure adjustments, according to the brief, resulting in a substantial build-up of arrears. Monetary policy has helped moderate inflation and sup ported exchange rate stability, but at the price of an increased cost of borrowing, a low availability of credit, and a drawdown in reserves, all of which have added an extra drag on growth the brief states.

The brief forecasts gross domestic product (GDP) growth will remain close to 3% in 2016, before improving in 2017 (4%) and 2018 (4.2%). The 2017 forecast assumes progress with the economic recovery plan, a better electricity situation than in 2015/2016, and improved copper exports, according to the brief.

For a shift to faster and inclusive growth, the brief recommends that efforts be made to overcome a set of interlinked economic policy challenges. With just some changes, the brief warns that, the desired outcomes will not be achieved. The sequencing and coordination of measures are key in 2017 and over the course of a medium-term economic recovery plan, the brief says.

The 2017 national budget and Economic Recovery Program provide a good framework to support a return to faster and more inclusive growth,” said Gregory Smith, World Bank senior economist. “Further details are needed on the government’s plan for 2018 and 2019.

For Zambia to realize its goal of fiscal fitness, higher domestic revenue collections are essential, according to the brief. The report suggests that the government work to improve both tax policy and tax admin istration. Report recommendations include:

  • Develop a strategy to increase tax compliance
  •  Scale up taxpayer focused public education campaigns
  • Design and build an effective system for property tax, and
  • Further support efforts to improve transparency in monitoring the country’s mineral value chain

There remains a need to look closely at ways to improve revenue collection so that economic re covery will be expedited, growth itself can be made more inclusive to support households’ escape from poverty, and to ensure that prosperity is better shared in Zambia,” said Ina-Marlene Ruthenberg, World Bank country manager for Zambia.



Welcome