Trade Performance Review 2005: Zambia

Year of publication: 
2005
Author(s): 
Inyambo Mwanawina
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Zambia's trade balance remained unfavourable from 1999 to 2003, despite the religious implementation of the stabilisation and structural adjustment programme since 1991 under the support of the International Monetary Fund, World Bank and bilateral donors. Export earnings declined by an average of -0.1% while imports increased by an average 20% annually over the same period with the trade balance deteriorating from US$274 million in 1999 to -US$601 million in 2003 as reflected in Table 1. The country's macroeconomic policy focused on reaching the decision and completion points of the enhanced highly indebted poor countries initiative of demand restraint and ensuring the attainment of the IMF/World Bank quantitative benchmarks and performance criteria. Demand restraint focused at improving both the fiscal balance and external position through curtailing public sector spending by targeting a budget deficit of 1.55% of GDP for 2003. However, the country went out of line with the IMF/World Bank programme and was subsequently placed under an IMF staff monitored programme due to the high fiscal deficit, which put excessive pressure on both money supply and the exchange rate. The situation was further exacerbated by maize imports in 2001 and high oil prices in 2003.

Zambia's trade with SA and the rest of SADC has also remained unfavourable, with SA trade being worst off. Exports to SA grew slower than imports (at an average of 13% compared to 22%) over the period, resulting in a worsening trade balance of -US$544m in 2003 compared to -US$189m in 1999. While trade with the rest of SADC is relatively small, the trend seen in table 1 is somewhat encouraging, with exports increasing by an average of 27%, performing marginally better than imports by a percentage point. The rapid reductions of trade tariffs in Zambia compared to its trading partners, coupled with the simultaneous liberalisation of both the current and capital accounts as well as poor infrastructure, could provide further explanation for the unfavourable external trade outcome.

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