Zambia Economic Brief: Reaping richer returns from public expenditure in agriculture

Zambia’s economy has shown recovery in 2017, but stronger growth and better macroeconomic indicators have not resulted in better fiscal indicators, according to a new World Bank Economic Brief. The Brief, Reaping Richer Returns from Public Expenditure in Agriculture, says economic growth – which stood at 3.4% for 2016 – is expected to increase to 4.1% for 2017, largely because of firmer copper prices and forecasts that point to a good 2017 harvest.

The Brief notes that Zambia’s government has been making progress with its economic recovery plan “Zambia Plus,” progress that has included (i) the clearance of US$462 million in arrears; (ii) the removal of fuel subsidies; and (iii) reduced electricity subsidies.

“Efforts are needed to reduce public expenditure arrears even further and improve commitment controls,” said Gregory Smith, the World Bank’s Senior Economist for Zambia. “These could include monitoring to ensure the same problem does not reoccur. Issuing a strategy for reducing public debt, as well as better communication through quarterly debt reports, would also be positive steps.”

Other good news for Zambians includes the fact that inflation has dropped to 6.5% in May 2017 from its February 2016 peak of more than 20%. This, together with a stable kwacha, has led Zambia’s Central Bank to ease monetary policy, reversing pressure on a risky growth in credit.

Economic growth is forecast to strengthen to 4.1% in 2017, 4.5% in 2018, and 4.7% in 2019. This forecast assumes the government will continue to implement its economic recovery plan, that the agricultural harvest and production of hydro-electricity will be stronger because of wetter weather, and that copper production will increase because of new and recently refurbished mines.

But stronger growth and better macroeconomic indicators have not been accompanied by improved fiscal indicators, for example the large stock of spending arrears and growing debt burden.

“There is a need to look closely at ways to improve public spending in agriculture to promote a non-copper economy and improve rural livelihoods,” the Bank’s Zambia’s Country Manager, Ina-Marlene Ruthenberg said. “Low agricultural productivity is a stumbling block when it comes to reducing poverty, as it has knock-on effects, such as gender disparity, land degradation and deforestation.”

The report highlights that Zambia has successfully increased its crop production, mostly of maize, largely thanks to increases in the size of areas under cultivation, as opposed to better yields. This leaves enormous scope to increase productivity and reduce the vulnerability associated with a high dependence for most of the population on rain-fed agriculture alone.

Zambia could also further diversify its agricultural output, investing more in horticulture, livestock, and aquaculture, all of which would create more sustainable agricultural growth and reduce poverty. Livestock, for example, already plays a large role in agriculture, contributing close to 30% of the country’s agricultural GDP and, depending on which province you are in, as much as 6% to 30% of household income. The number of cattle in Zambia increased by 70% between 2009 and 2013.

Aquaculture could also play more of a role as Zambia is a net fish importer and has 12 million hectares of water from rivers, lakes and swamps.

---

Mary Tembo is small scale farmer in Chipata, about 575 km from Lusaka in Zambia’s Eastern Province. She grows maize and groundnuts, and is part of the farmers’ group that is learning about climate-smart agriculture.

The World Bank is putting the lion’s share – US$17 million – of a US$33 million package into promoting climate-smart agriculture and sustainable landscape management practices in Eastern Province. The Zambia Integrated Forest Landscape project will support farmers to help them make a better living without increasing the amount of deforestation that Zambia’s natural forest is currently suffering from. It aims to do this by helping farmers like Mary with fertilizer, tree seedlings, equipment and irrigation.

New funding for the project comes at a time when Zambia, like many African countries, faces a long-term threat to its rural economic growth as result of climate change. Already, Zambia has suffered drought, flash floods and temperature extremes. Studies commissioned by the Zambian government estimate substantial losses to Zambia’s GDP from diminishing returns in agriculture and natural resources over the next 10 to 20 years as a result of climate change, with an associated increase in levels of poverty.

With the overall poverty rate in Zambia standing at 57.5%, and at as high as 84.3% in Eastern Province, sustainable farming is critically important. The project is focusing on rural communities in the province’s nine districts: Chipata, Lundazi, Mambwe, Petauke, Katete, Sinda, Chadiza, Vubwi and Nyimba.

Dependent on both small-scale agriculture and natural forest, rural communities in Zambia’s Eastern Province are among the world’s most vulnerable. The Government of Zambia is partnering with development organizations to scale-up its efforts to help small-scale agriculture adapt. Almost 215,000 people are due to participate in the Integrate Forest project as it gathers pace, 30 percent of them women.

“This will improve rural livelihoods in Eastern Province by helping farmers increase their income through better farming and forest-based activities, better access to markets and more capacity to manage land resources sustainably,” said the Bank’s Coordinator for Climate Smart Agriculture, Ademola Braimoh. “The project will also support improved land use planning and help rural communities to reduce deforestation and improve the benefits they receive from forestry, agriculture, and wildlife,” he added.

The project will also support multisector coordination and capacity-strengthening activities that emphasize a transition to low carbon development. 

Efforts to promote climate-smart agriculture are intensifying as unproductive farming and poor resiliency to drought threaten to exacerbate poverty in Eastern province. Soil nutrient levels across the province have diminished. Longer dry seasons are stunting crop growth.

“The aim is to reduce the emission of Greenhouse Gases through the sustainable management of land traditionally devoted to community-led agricultural and non-agricultural activities in Eastern Province,” said Ina Ruthenberg, World Bank Country Manager for Zambia.

“The project will also create an enabling environment for Zambia to benefit from up to US$30m from a future emissions reduction purchase agreement between the Government of Zambia and the World Bank as a Trustee for BioCarbon Fund’s Initiative for Sustainable Forest Landscapes,” she added.

The Zambia Integrated Forest Landscape project will be implemented by government line ministries in close collaboration with stakeholders under the oversight of the Inter-Ministerial Climate Change Secretariat, which is housed within the Ministry of Development and Planning. The project funds include the US$17 million in International Development Association credit, a Global Environment Facility grant of US$8.05 million, and a BioCarbon Fund grant of US$7.75 million.