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Global Financial Crisis Discussion Series: Zambia

Research report

Research report

This study explores the impact of the global financial crisis on Zambia through its effects on trade, foreign direct investment (FDI), development assistance and remittances, which are the major transmission mechanisms of the crisis to the country. The crisis has produced macroeconomic imbalances. Inflation and interest rates have risen and stock prices have fallen. Foreign portfolio flows have been adversely affected. The kwacha has depreciated against the major currencies. The trade balance has been affected. Mines have scaled down their investments, production and employment, and some mining units have been closed, with about 8100 jobs lost. Secondary industries supporting the mines in the copper belt and tourism sector have been affected. The government could address the crisis through fiscal monetary and exchange rate policies, but for policies to be effective they must be accompanied by growth-enhancing structural policy measures. These include economic diversification and improvement of the business environment. Other requirements are governance reforms in the mining sector, social protection and a package of austerity measures.

Manenga Ndulo, Dale Mudenda,Lutangu Ingombe and Lillian Muchimba