Zambia is on the verge of completing its debt restructuring under the G-20 Common Framework after nearly four years of negotiations with bilateral creditors and international bondholders. Despite signs of economic recovery from 2021 to 2023 and ongoing policy reforms, the recently released Zambia Country Economic Memorandum indicates that structural challenges remain.
The report notes that Zambia's growth during the commodity boom in the 2000s was not sustainable, with benefits scarcely reaching the poorest households. Over two decades, insufficient productive jobs have been created to lift people out of poverty.
Zambia faces a significant challenge as its working-age population is expected to grow by over 10 million by 2050. Many young people will enter the labor force seeking better-paying jobs than those available to previous generations. Additionally, a severe drought highlights the urgent need for resilience against shocks.
To address these issues, boosting productivity and accelerating economic transformation are essential for sustained and inclusive growth.
During the 2000s, Zambia's economy grew at an average rate of 7.7% annually, driven largely by a copper price boom. The mining sector contributed significantly to this growth but mainly benefited urban areas, leaving rural poverty high.
When the commodity boom ended, economic growth slowed to an average of 4.1% in the 2010s and even lower between 2015 and 2019. Government services and public investment became primary growth drivers but relied heavily on public debt, leading to macroeconomic imbalances. By 2020, Zambia defaulted on its Eurobonds and entered debt treatment discussions.
Despite periods of rapid GDP expansion, poverty reduction has been limited. Between 1996 and 2015, those living below the poverty line increased by about 2.5 million people. By 2022, approximately 11.7 million Zambians—around 60% of the population—remained below the poverty line.
From 2001 to 2019, employment in Zambia grew at a rate of 4.3% annually; however, most new jobs were in agriculture and services—sectors with low productivity rates. Agriculture employs about 60% of Zambians but has seen productivity drop by nearly half over two decades.
The services sector also shows limited improvement with most private-sector jobs found in small informal businesses where wage-based employment opportunities are scarce. The public sector absorbs many tertiary-educated workers due to higher wages but leaves few job opportunities for others.
Looking ahead, three pathways are outlined for achieving sustained inclusive growth:
1) Increasing agricultural productivity: Labor productivity must improve through infrastructure focus; extension services; climate change adaptation; crop diversification promotion; expanding agribusiness into high-value crops/livestock/aquaculture offers potential for better jobs/economic diversification;
2) Boosting formal firms' productivity: Productivity needs increasing across all sectors especially private ones via financial service access expansion/improved electricity supply/digital transformation/business climate enhancement supporting new/existing firms creating quality jobs;
3) Strengthening fiscal governance/leverage global transitions: Addressing fiscal vulnerabilities crucial using revenue-enhancing measures/expenditure efficiency improvements/global shift towards low-carbon energy offering growth pathways leveraging untapped natural wealth potential transforming economy paving way sustainable growth/better jobs/improved livelihoods citizens World Bank collaborating government overcome obstacles harness potential transform economy pave way sustainable future citizens