2021 Index of Economic Freedom

Zambia

OVERALL SCORE50.4
WORLD RANK159
Rule of Law

Property Rights37.2

Judicial Effectiveness26.2

Government Integrity30.5

Government Size

Tax Burden71.1

Government Spending78.5

Fiscal Health5.3

Regulatory Efficiency

Business Freedom66.1

Labor Freedom45.6

Monetary Freedom71.2

Open Markets

Trade Freedom68.2

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 17.9 million
  • GDP (PPP):
    • $75.9 billion
    • 1.5% growth
    • 3.2% 5-year compound annual growth
    • $3,624 per capita
  • Unemployment:
    • 11.4%
  • Inflation (CPI):
    • 9.8%
  • FDI Inflow:
    • $753.2 million

Zambia’s economic freedom score is 50.4, making its economy the 159th freest in the 2021 Index. Its overall score has decreased by 3.1 points, primarily because of a decline in fiscal health. Zambia is ranked 39th among 47 countries in the Sub-Saharan Africa region, and its overall score is below the regional and world averages.

Zambia’s economy sank to the bottom of the mostly unfree category this year and registered its lowest score since the inception of the Index in 1995. The country’s crushing load of external debt has damaged economic freedom. In addition to addressing its poor fiscal health, reversing course would require the government to reform its weak rule-of-law institutions to strengthen its judicial system and the fight against corruption.

IMPACT OF COVID-19: As of December 1, 2020, 357 deaths had been attributed to the pandemic in Zambia, and the economy was forecast to contract by 4.8 percent for the year.

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Background

Independent from the United Kingdom since 1964, Zambia traditionally has been one of southern Africa’s most politically stable countries. Edgar Lungu of the Patriotic Front narrowly won a special presidential election in 2015 after his predecessor’s death in office and was then elected to a full five-year term in 2016. The arrest of opposition leader Hakainde Hichilema on charges of treason in 2017 reflects a trend of shrinking democracy under Lungu. Zambia has taken on massive and unsustainable debt, frequently under opaque terms, to finance infrastructure spending. Zambia is Africa’s second-largest producer of copper, and an uptick in world mineral prices would encourage higher output and boost export receipts. The incomes of about two-thirds of the population are below the poverty line.

Rule of LawView Methodology

Property Rights 37.2 Create a Graph using this measurement

Judicial Effectiveness 26.2 Create a Graph using this measurement

Government Integrity 30.5 Create a Graph using this measurement

Although the property rights law was strengthened in 2016, actual protection of property rights and enforcement of contracts are weak. About 70 percent of land is under traditional ownership. The process of land acquisition and registration is complex and time-consuming. The judicial system is inefficient, poorly resourced, and politically influenced. Despite some progress in the past decade, widespread corruption, graft, and mismanagement continue to hinder the functioning of the government.

Government SizeView Methodology

The top individual income tax rate is 37.5 percent, and the top corporate tax rate is 35 percent. Other taxes include value-added and property transfer taxes. The overall tax burden equals 16.2 percent of total domestic income. Government spending has amounted to 26.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.8 percent of GDP. Public debt is equivalent to 85.7 percent of GDP.

Regulatory EfficiencyView Methodology

Business freedom is little changed compared to last year, and Zambia lags behind other countries in undertaking reforms. The value added per worker relative to the minimum wage is very low. The enormous budgetary cost of servicing the country’s external debt, which as a percentage of GDP has quadrupled since 2012 and is owed mostly to China, has left little money available to fund existing subsidies (e.g., for electricity) and social welfare programs.

Open MarketsView Methodology

Zambia has two preferential trade agreements in force. The trade-weighted average tariff rate is 8.4 percent, and two formal nontariff measures are in effect. Other informal barriers further constrain the freedom to trade. The investment regime is nontransparent and inefficient, although foreign investment is allowed in most sectors. The financial sector is dominated by banking. Access to financial services has been expanding gradually throughout the country.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius772.1
2Rwanda68.3-2.6
3Botswana67.6-2.0
4Seychelles66.32.0
5Cabo Verde63.80.2
6Namibia62.61.7
7Côte d'Ivoire61.72.0
8Tanzania61.3-0.4
9South Africa59.70.9
10Benin59.64.4
11Ghana59.2-0.2
12The Gambia58.82.5
13Nigeria58.71.5
14Uganda58.6-0.9
15Gabon58.11.4
16Senegal580.0
17Madagascar57.7-2.8
18Togo57.53.4
19Niger57.32.6
20Guinea56.50.0
21Burkina Faso56.5-0.2
22Djibouti56.23.3
23Mauritania56.10.8
24São Tomé and Príncipe55.9-0.3
25Comoros55.72.0
26Mali55.6-0.3
27Eswatini55.1-0.2
28Kenya54.9-0.4
29Guinea-Bissau54.91.6
30Angola54.22.0
31Lesotho53.5-1.0
32Cameroon53.4-0.2
33Malawi530.2
34Sierra Leone51.73.7
35Ethiopia51.7-1.9
36Mozambique51.61.1
37Republic of Congo50.78.9
38Chad50.40.2
39Zambia50.4-3.1
40Burundi49.90.9
41Equatorial Guinea49.20.9
42Liberia49.20.2
43Democratic Republic of Congo49-0.5
44Central African Republic48.8-1.9
45Eritrea42.33.8
46Zimbabwe39.5-3.6
47Sudan39.1-5.9
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