Poverty, inequality and growth in Zambia during the 1990s

Zambia has undergone a dramatic transformation of economic policy during the 1990s. The election in 1991 of the Movement for Multi-party Democracy government saw the introduction of a series of major economic reforms designed to transform the Zambian economy from a relatively inward looking and state dominated economy to a outward oriented economy based upon private enterprise. A sharp stabilization early in the decade was followed by reforms to open the economy to the rest of the world including exchange rate liberalization, trade liberalization and capital account liberalization. In addition a set of structural and institutional reforms were initiated including reform of agricultural marketing, a large privatization programme and reforms to the public sector. This paper describes the economic reforms of the 1990s and reanalyses household survey data from three of the latest nationally representative household surveys in Zambia in order to chart the impact of these reforms upon poverty and inequality. We find that macroeconomic stabilization combined with early failed attempts at agricultural marketing liberalization caused a dramatic increase in poverty between 1991-6 in urban areas. However, subsequent modest growth and relative stability resulted in a reduction in poverty between 1996 and 1998 particularly in rural areas. In addition poverty-growth and poverty-inequality elasticities are calculated to assess the potential contribution of growth and changes in inequality for future poverty reduction. It is shown that a growth rate of around seven percent would be required to achieve the International Development Target of halving the proportion of people in poverty by 2015. Zambia has not experienced such a level of growth in its recent history and is therefore unlikely to meet the poverty reduction target. – Zambia ; poverty ; growth ; inequality ; economic reform