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The Global Financial Crisis and Developing countries: Case of Zambia
The Global Financial Crisis Workshop ODI , London – UK 11th February 2009
By Manenga Ndulo, Dale Mudenda, Lutangu Ingombe and Lilian Muchimba- University of Zambia
The Global Financial Crisis and Developing countries: Case of Zambia - - PowerPoint PPT Presentation
The Global Financial Crisis and Developing countries: Case of Zambia - - PowerPoint PPT Presentation
The Global Financial Crisis and Developing countries: Case of Zambia The Global Financial Crisis Workshop ODI , London UK 11 th February 2009 By Manenga Ndulo, Dale Mudenda, Lutangu Ingombe and Lilian Muchimba- University of Zambia
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Introduction
Positive economic growth over 2000 – 2008 Chance to reduce poverty Global crisis threatens above scenario
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Economic Performance
Year 2000 2002 2004 2005 2006 2007 2008
GDP Growth 3.5 3.3 5.4 5.2 6.2 5.4 5.8 GDP /capita (US$) 315 350 490 655 917 917 (US$) Inflation 30 26.7 17.5 15.9 8.2 8.9 16.6 Fiscal Bal (% GDP) NA
- 4.1
- 2.9
- 0.9
4.3
- 2.1
- 2.7
DS/GDP 17.3 18.7 17 23.2 25.4 23.3 GDI/GDP 16 20.7 28.4 23.2 24.5 21.8 CA /GDP
- 15.3
- 11.4
- 9.1
1.1
- 2.4
- 9.1
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Real GDP growth rate
4% 5% 6% 7% 0% 1% 2% 3% 4% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Trend in Inflation rate
25 30 35
Inflation rate, %
5 10 15 20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Trends in savings and Investment
20% 25% 30% 0% 5% 10% 15% 2000 2004 2005 2006 2007 Savings Investment
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Private Capital Flows
700 800 900 1000 616 984 #REF! #REF! 100 200 300 400 500 600 2000 2002 2004 2005 2006 2007 122 82 364 380 278 147 122.4 50.4 41.8
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Remittances Inflows (US$M)
40 50 60 70 36.25 48.448 52.87 57.68 59.3 68.195 10 20 30 2003 2004 2005 2006 2007 2008 Inflows
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Trade Indicators
3,891 4,448 4,591
3,000 3,500 4,000 4,500 5,000
754.70 746 884 965 1,065 1,825 2,208
500 1,000 1,500 2,000 2,500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Merchandize exports Merchandize Imports
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Trade Indicators
2.50 3.00 3.50
Copper price (US$/Pound )
0.00 0.50 1.00 1.50 2.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 Copper price (US$/Pound )
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Terms of trade
150 200 250
TOT Index (2000=100)
50 100 150 1997-2001 2002 2003 2004 2005 2006 2007 TOT Index (2000=100)
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ODI Indicators
1000 1200 1400 1600
ODA (US$ M)
200 400 600 800 2000 2001 2002 2003 2004 2005 2006 ODA (US$ M)
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Impact Slowed economic growth projected at 5% (2009) Overall output Employment loss: ( Out of 32, 611 workers in the mines) Chambishi metals closed - 1, 111 – Workers Chambishi metals closed - 1, 111 – Workers Luanshya mine Ceased - 1, 716 worker KCM - 800, Mopani - 577 workers Bwana Mkubwa mine- 345 workers Lumwana – Laying off workers Milyanshi copper project – put on hold
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Cont’d
15% of mine workers already lost jobs Exploration Projects affected- because these mainly depend on bank loans for financing Contract labour to the mining industry - repair maintenance, mine development services Reduced expatriate labour on mines Reduced Foreign exchange – depreciation and instability Reduced Foreign exchange – depreciation and instability
- f the exchange rate
Supporting industries e.g., electricity, transport, water etc. Inflation Stock market- index reduced by 29% in 2008 Reduced government revenue -
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Policy response
- 1. Prudent Fiscal policies
- 2. Economic diversification – emphasis on
infrastructure development
- 3. Tight monetary policy – lower inflation
- 3. Tight monetary policy – lower inflation
- 4. Negotiation with mines –e-,g., suspension of
windfall tax,
- 5. Strengthen social protection