Power Sector Pivotal to Inclusive Growth in Zambia

December 9, 2015

LUSAKA, December 9, 2015— Following successive years of political stability and strong economic growth, Zambia’s growth is expected to fall below 4% in 2015 after years of 6.4% average growth between 2010 and 2014, according to the sixth World Bank Zambia Economic Brief.

And in this trend, Zambia is not alone. African economies are facing difficult global conditions combined with domestic challenges, and in particular Sub-Saharan Africa’s economic growth will slow in 2015 to 3.7% from 4.6% in 2014, according to World Bank projections. Dropping prices of oil, copper and iron ore, slowdown of Chinese economy and tightening global financial conditions are the main factors causing this deceleration in growth in the region and particularly in Zambia.

Policy makers in commodity-exporting countries are facing increasing difficulties across the globe and Zambia is no exception in this. It will be critical to find ways to overcome these challenges as the economy slows down in order to sustain its trajectory of growth.” said Gregory Smith, World Bank Senior Economist.

At the domestic level, 2015 brought lower and poor timed rainfall which impacted the agriculture production and affected incomes of 62% of the population living in poverty, together with a crisis impacting all sectors of the economy and repeat fiscal deficits impacted on Zambia’s growth. 

Copper mining is the biggest contributor to Zambia’s export earnings and economic growth, however, the recent fall in copper prices and increasing foreign debt highlights the need for further diversification” said Ina-Marlene Ruthenberg, World Bank Country Manager for Zambia.

These external and domestic challenges, will affect GDP growth which is expected to be 3 to 3.5% in 2016, before bouncing back to potential of 5 to 6% by 2018 as copper prices stabilize and domestic pressures ease.

Strengthening the fiscal position and restoring fiscal buffers will be necessary to increase confidence in the economy, reduce the need for costly borrowing and build resilience against further exogenous shocks.

The power sector is pivotal to Zambia’s growth in the future. Zambia’s economy has expanded by an average of 6.4% and 7.4% over the last decade increasing the demand for electricity. The prospect of solar and thermal generation in the next few years will help diversify Zambia’s power generation to complement its hydro resources.

Despite the current global economic and domestic challenges Zambia remains well placed to weather the storm and maintain its progress with development objectives. The series of Economic Briefs that the World Bank publishes are intended to stimulate dialogue and inform decision making to help Zambia further improve her economy. 

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