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- GDP (PPP):
- $61.0 billion
- 5.4% growth
- 7.1% 5-year compound annual growth
- $4,064 per capita
- Inflation (CPI):
- FDI Inflow:
Despite high levels of economic growth in the past decade, corrupt governing practices leave millions of Zambians in severe poverty. The judicial system is weak and falls short in unbiased enforcement of the law, undermining anti-corruption efforts. Corruption is also a major obstacle and deterrent to foreign investment.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 58.8 (up 0.1 point)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 106th
- Regional Ranking: 16th in Sub-Saharan Africa
- Notable Successes: Trade Freedom and Management of Public Spending
- Concerns: Rule of Law and Labor Freedom
- Overall Score Change Since 2012: +0.5
High commodity prices have driven a decade of strong economic growth, but the economy would benefit tremendously from diversification. Bloated government payrolls, shifting tax laws on the mining sector that scare away investors, and spiraling government debt exacerbate the economy’s problems.
Zambia, a landlocked state and Africa’s second-largest copper producer, is one of the most politically stable countries in southern Africa, successfully undergoing five peaceful transfers of presidential power since the end of one-party rule in 1991. Edgar Lungu of the Patriotic Front narrowly won a January 2015 presidential by-election that was held to replace Michael Sata, who died in office in October 2014. Zambia is revising its constitution, and contentious constitutional issues will be put to a referendum in conjunction with the 2016 presidential and legislative elections. A recent slump in copper prices has been damaging and made the kwacha one of the world’s worst-performing currencies in 2014.
Corruption is widespread, and although the government has taken some steps to fight graft, the acquittal of former President Hastings Banda on charges of corruption in 2015 raised questions about its ability to prosecute powerful people successfully. The rule of law remains uneven across the country. The inefficient judicial system is underresourced and politically influenced. Protection of property rights and enforcement of contracts are weak.
The top personal income and corporate tax rates are 35 percent. Other taxes include a value-added tax and a property transfer tax. The overall tax burden equals 14.7 percent of total domestic income. Government spending is equivalent to 25.1 percent of GDP. Public debt amounts to about 31 percent of annual domestic output. The government has initiated large infrastructure projects.
There is no minimum capital requirement for establishing a business, but requirements for commercial licenses are time-consuming. Firms tend to hire workers on an informal or short-term basis. Subsidies for maize and fuel have been maintained, but electricity subsidies were cut in 2015. That action particularly hurt foreign mining companies that use 50 percent of the power generated by the state-owned utility.
Zambia’s average tariff rate is 3.4 percent. Agricultural trade is restricted. Importation of goods is expensive and time-consuming. Foreign investment is screened by the government. State-owned enterprises distort the economy. The financial system is dominated by banking. Zambia has a relatively advanced banking regime, and financial intermediation and credit to the private sector continue to expand.