World Bank Group2015-06-232015-06-232015-06-01https://hdl.handle.net/10986/22039After several years of strong economic performance, Zambia now confronts several important challenges that must be managed carefully to ensure sustained and inclusive growth in the future. On the one hand, the economy grew by an estimated 5.5–6.0 percent in 2014, somewhat above the average for African economies. Monthly copper production increased by an average of 8 percent during the second half of 2014, reversing the sharp slide in early 2014. Inflation fell to 7.2 percent in March and April, helped both by falling world oil prices and by the Bank of Zambia’s monetary tightening. In the first half of 2015, the authorities adjusted several key economic policies to respond to serious problems: revising rules on VAT refunds in February, announcing a new mining fiscal regime in April, and raising fuel prices in May so that the government could recover import costs. On the other hand, the kwacha has come under renewed pressure. It lost 17 percent of its value against the U.S. dollar from December 2014 through the end of March 2015. Since then it has recovered somewhat, but foreign exchange markets remain volatile. Interest rates have been rising since September 2014, due in part to increased government borrowing and in part to steps taken by the Bank of Zambia to tighten credit. Over the medium term, growth should hold steady in 2015 and then accelerate to around 6–7 percent per year in 2016–2018. Although inflation is expected to rise towards the end of 2015, it should resume falling in 2016. Low commodity prices, a more stable exchange rate, and adequate local harvests would help contain inflationary pressures and boost real disposable incomes. The resulting pick-up in private consumption, coupled with increasing copper exports, should help strengthen growth prospects.en-USCC BY 3.0 IGOMONETARY POLICYDEFICITSOCIAL COSTSCAPITAL MARKETSFISHBASIS POINTSOIL PRICEECONOMIC GROWTHDEPOSITSENVIRONMENTAL PROTECTIONMARKET DISTORTIONSENVIRONMENTAL DEGRADATIONFISCAL DEFICITSINTERESTDOMESTIC BORROWINGFOREIGN EXCHANGE MARKETEXPECTATIONSGOVERNMENT SPENDINGPRODUCERSEMERGING ECONOMIESENVIRONMENTAL COSTSEXCHANGEHEAVY METALSECONOMIC DEVELOPMENTSBOND SPREADSBALANCE OF PAYMENTSFINANCIAL RESOURCESLABOR FORCEDOMESTIC MARKETDEVELOPING COUNTRIESEMISSIONSGOVERNMENT BORROWINGEXPORTERSREVENUESFISCAL POLICYBONDSINCENTIVESMODELSTAXLONG-TERM INVESTMENTFOREIGN EXCHANGE MARKETSRESERVECENTRAL BANKSCURRENT ACCOUNT SURPLUSESINTERNATIONAL BANKINFLATIONPENSIONAUDITSBUDGETCENTRAL BANKECONOMIC ACTIVITYTRADE BALANCEOIL PRICESEXPLOITATIONLABOR COSTSOILCURRENCYAIR POLLUTIONRESERVE BANKCAPITAL FORMATIONIMPORT COSTSEXCHANGE RATESTRADINGOPTIONSINTEREST RATESSOVEREIGN BONDOPECMARKETSDEBTRETURNLAND DEGRADATIONDEFICITSINFLATION RATEPOLLUTIONFORESTRYECONOMIC POLICIESDIVIDENDSREGULATORY CAPACITYCAPITAL INVESTMENTSMETALSCASH TRANSFERSSUBSIDIESFINANCECERTAIN EXTENTEFFICIENCYFISHINGTAX POLICIESTAXESFISCAL DEFICITGOVERNMENT SECURITIESRESOURCESAUCTIONSEQUITYINVESTORSPRODUCTIVITY GROWTHCONSUMPTIONCOPPER SMELTERSFEDERAL RESERVEINTEREST PAYMENTSGOODFEDERAL RESERVE BANKWAGESINTERNATIONAL TRADEENVIRONMENTAL MANAGEMENTVALUESMARKET PRICESFUTURECREDITBUDGETSENVIRONMENTAL IMPACTSMINESCONTRACTEXPENDITURESPROPERTYDECISION MAKINGECONOMIC RENTSTAX RATEST-BILLT-BILL RATEMARKETENVIRONMENTSULFUR DIOXIDE EMISSIONSFOREIGN EXCHANGEMONETARY POLICIESSTREAMSTERMS OF TRADESECURITIESTAX REVENUECAPITAL GOODSINFLATION RATESCURRENCIESGOVERNMENT DEBTECONOMIC DEVELOPMENTTRADECURRENCY DEPRECIATIONLANDGOODSDRINKING WATERINVESTMENTBONDCOMMERCIAL BANKSSHAREPOVERTYFINANCIAL MARKETSGLOBAL INTERESTWATER POLLUTIONREVENUEEMPIRICAL EVIDENCEPRIVATE CONSUMPTIONSULFUR DIOXIDEINVESTMENTSPENSION FUNDARSENICPRODUCTION QUANTITIESEXCHANGE RATEINSTRUMENTPROFITSPOLICY INSTRUMENTSACID RAINCAPITAL INVESTMENTENVIRONMENTALCOMMODITY PRICESARREARSPRICESPRODUCTION COSTSECONOMIESReportWorld Bank10.1596/22039