|Macroeconomics & Monetary Policy||
The overall goal of the Macroeconomics unit is to improve public policy for growth, equity and poverty reduction through macroeconomic policy analysis and research. It focuses on analysis of pertinent macroeconomic policy issues such as interest rates, inflation, and exchange rate movements; domestic and external public debt.
The unit’s core works planned for the year 2019 will include the following activities:
a) Using Indexes to Assess Elements of Financial Soundness & Investor Perception in Zambia
As earlier alluded to, this comprised the undertaking of two exercises to construct and assess a Financial Conditions Index (FCI) and an Investor Perceptions Index (IPI) and set the groundwork or foundation of the construction of the Banking Services Cost and Quality (BSCQ) Index, and a Commercial Banking Infrastructure Density (CBID) Index. This emerged under the BOZ-ZIPAR MOU and was originally slated for 2018, but was proposed to be deferred to 2019 due to logistical challenges that prevented BOZ from approving the studies on time in 2018. The expected deliverables of Phase I (construction and assessment of FCI and IPI) will include:
- An overall framework defining and establishing a set of stable financial sector indexes (FCI and IPI) that can be replicated and updated from time to time.
- Two final reports with index-specific assessments and insights on the key characteristics and frontier-outcome gaps associated with financial conditions on the one hand and investor perceptions on the other, in Zambia.
In terms of work planning, Phase I will run from Q1:2019 to Q3:2019 and with an overlap, Phase II (setting the foundation for BSCQ and CBID) will run from Q3:2019 to Q1:2020. A total budget amount of ZMW120,000 is envisaged to come from BOZ under the BOZ-ZIPAR MOU.
b) China-Zambia Relations Revisited
In 2016, ZIPAR undertook a study on China-Africa Trade Developments and Impacts: Case of Zambia-China Relations. In 2017, this study was disseminated by the Minister of National Development Planning at a policy dialogue forum. In the same year as well as in 2017 and 2018, a number of ZIPAR researchers undertook exchange study visits to China, hosted by the Chinese Government and local think tanks in mainland China. Meanwhile in Zambia, China’s investment, business and debt presence continued to grow. It sometimes dominated economic discussions around Zambia’s heavy indebtedness to China and Chinese business dominance in some sector in Zambia. Indeed, rumours escalated in 2018 about China’s takeover of key strategic public assets in Zambia. Misunderstandings and misgivings about China’s presence in Zambia have therefore emerged. The planned study on China-Zambia relations will broadly aim to assess how Zambia is preparing itself to take advantage of opportunities and mitigate threats associated with the arise of Chinese interests in the country. It will assess Zambia and China’s offensive and defensive economic, political and legal interests. It will use political economy and institutional economics analysis, focusing on the period 2010-2018. The study will mainly use desk review and key informant interviews to gather the relevant data and information. The main study outputs for 2018 will be in terms of one working paper supported by a policy brief. The study will be conducted over the period Q2:2019 to Q2:2020 (with a second working paper expected in Q2:2020).
c) Ever Changing Times: Zambia’s Growth Story, told through an Extension of the Macro-economic Performance Assessment Framework (MPAF)
Since 2015, Zambia has continued to experience persistent, and in many cases worsening, Macro-economic and external sector conditions. The 2018 rapid assessment policy brief entitled ‘A Sobering Macro-economic Outlook’ revealed that Zambia’s growth prospects will weaken and push the country back to low income status by 2022 should the economic conditions prevailing between 2014 and 2017 persist. Understanding the long-term drivers of Zambia’s growth is therefore imperative. As such, in 2019, as the MPAF continues with two key activities planned from the 2018 Work Plan, it will incorporate a three key sub-activity. The three activities to be done are therefore:
- Building internal skills in DSGE modelling through in-house and external trainings. The ET and PUBLIC FINANCE units will offer technical assistance on this. The trainings are envisaged to be done at various points during Q1-Q4:2019 (intermittently) as opportunities arise.
- Continuing to build and stable the MPAF database. This will entail routine quarterly data collection from BOZ, MOF and CSO during Q1-Q4 2019 and into 2020 and beyond given that the MPAF database is envisaged as a standing arrangement for ZIPAR.
- Undertaking an econometric analysis of the long-term determinants of growth of Zambia, using authentic international time-series data for the period 1964-2018. The quantitative analysis will be supported by a qualitative events analysis, which will attempt to isolate key economic growth spurts and explain the Macro-economic conditions that prevailed during those episodes. The technical aspects will be from Q1-Q3 2019, with the dissemination slated for Q4:2019
d) Evaluating the Economic Stabilization and Growth Programme (ESGP) 2017-2019
Following Zambia’s experience of an economic mini-crisis in 2015, in September 2017, the authorities launched the ESGP 2017-2019 (or Zambia Plus). The ESGP was expected to be implemented over 2017-2018; although strictly speaking, the programme could only apply to 2018 and 2019 since it was launched towards the end of 2017. Zambia Plus was premised on the idea of “Restoring Fiscal Fitness for Sustained Inclusive Growth and Development” and was meant to serve as the Medium Term Expenditure Framework (MTEF) for the period 2017-2019. It has five key pillars, namely:
- restoring budget credibility;
- enhancing domestic resource mobilisation and refocusing of public spending on core public sector mandates;
- improving economic and fiscal governance;
- ensuring greater economic stability, growth and job creation; and
- scaling-up social protection programmes.
Zambia Plus was also envisioned as being instrumental in creating renewed consultative processes through which Cooperating Partners, notably the IMF, would play a significant role in complementing the authorities’ implementation efforts. Key questions, therefore, are: how well did Zambia do in terms of implementing the ESGP in 2018? What were the “game changers” and “missed opportunities” in the implementation of the Programme? The ESGP evaluation will involve systematic policy content and programme analyses, to answer these questions. The technical work is slated Q1-Q3 2019, with dissemination slated for the end of Q3:2019 or early Q4:2019.
Macroeconomics Research Team
- Caesar Cheelo
- Ignatius Masilokwa
- Nakubyana Mungomba