This 2015 Article IV Consultation highlights that in the last two years, the Zambian economy has been weighed down by large fiscal imbalances, lower copper prices, and policy uncertainties. Real GDP growth has slowed, the current account has deteriorated, international reserves have fallen, and the exchange rate has been under downward pressure. The IMF staff estimates that real GDP growth slowed from 6.7 percent in 2013 to 5.6 percent in 2014, driven by a contraction in copper production. Growth is projected to average 5.5–7 percent a year over the medium term, reflecting the impact of investments in mining and electricity in recent years.
This Selected Issues paper presents an analysis of change in Zambia’s mining fiscal regime. Foreign investment has revived Zambia’s mining sector. However, its mining sector’s direct contribution to government revenues has been low. Reflecting persistent concerns about the low contribution of the mining sector to budget revenues, the government has amended the fiscal regime many times over the last seven years. The 2015 budget introduced major changes to the mining fiscal regime. The authorities estimate that the change would boost budget revenues from the mining sector by about 1 percent of GDP, based on an assumption that the change would have no adverse impact on production.
Despite the rapid increase in FDI flows to LICs, there have been relatively few studies that have specifically examined these flows. This paper attempts to partially fill the void by throwing light on one particularly dynamic aspect of global FDI-flows from Brazil, Russia, India and China (BRICs). The paper finds that official data sources undoubtedly underestimate the volume and scope of FDI flows as many small and medium-sized enterprises (SMEs) do not always register their investment. As a result, while it is difficult to estimate accurately the growth impact of BRIC FDI, there is case study evidence that it is increasingly significant. Second, while initial investment, mostly by state-owned companies, has often been destined for natural resource industries, over time, investment has been spreading to agriculture, manufacturing, and service industries (e.g., telecommunications). Third, FDI from BRICs flows into many non resource-rich countries in LICs and plays a significant role in growth in those countries.
Zambia’s nonperforming loans are expected to increase and banks have become more cautious in their lending. The staff report for the Zambia’s first and second reviews of the Three-Year Arrangement under the Poverty Reduction and Growth Facility and request for Waivers of Nonobservance of Performance Criteria, and Augmentation of Access is examined. The slowdown in external demand and uncertainty about the global outlook have negatively affected growth prospects and the balance of payments, and made the program targets for reserve accumulation unattainable.
The fiscal stance has been more expansionary in 2008, but there should be no need for net domestic financing. The new fiscal regime for mining increases the average effective tax rate from a level that was significantly below that of other mining countries. The monetary program aims to reduce annual inflation to 7 percent in 2008. The authorities intend to address the challenge of coordinating fiscal and monetary policies to enable the Bank of Zambia (BoZ) to improve liquidity management. Structural policies will complement the medium-term macroeconomic framework.
This paper examines Zambia’s 2003 Article IV Consultation and Ex Post Assessment of Performance Under IMF-Supported Programs. Zambia’s economic performance has improved significantly in the last four years. After more than two decades of economic decline and inflation averaging more than 50 percent, growth has averaged about 4 percent per year since 2000. The Ex Post Assessment of Performance under IMF-supported programs pointed out that implementation under the Enhanced Structural Adjustment Facility arrangement, approved in 1995, was poor, but generally improved under the Poverty Reduction and Growth Facility arrangement, approved in 1999.
This Selected Issues paper analyzes sources of growth in Zambia. It assesses domestic debt dynamics and expenditure composition under two scenarios: first, the execution of the fiscal adjustment envisaged in the 2004 budget and in the medium-term framework; and second, the continuation of recent trends. The paper assesses movements in the external value of the kwacha using a number of different approaches. It also looks at developments in the real exchange rate and in differentials in rates of return on financial assets in Zambia and key financial centers.