Economics · Oct / Nov 2019 · Paper 23 · Question 1

A new capital for Zambia? Zambia is a middle-income country but one with 60% of its population of 15 million living below the poverty line. In 2017, the Zambian government announced that it was planning to move the country’s capital from Lusaka in the south of the country to Ngabwe, a village in the centre of the country. Ngabwe currently lacks good roads and other infrastructure. A move to Ngabwe, however, may help the country to cope with its high rate of population growth and encourage entrepreneurs to set up new businesses in that area. In 2017, the country had a zero net migration rate, a birth rate of 41.8, a death rate of 12.4, and a life expectancy of 52.5 years. Zambia’s economic growth rate averaged 6.8% between 2004 and 2014. This rate fell after 2014 due, in part, to a depreciation in the kwacha, Zambia’s currency. The reduction in the foreign exchange rate of the kwacha contributed to the rise in the country’s inflation rate from 10.1% in 2015 to 20.6% in 2016. In 2017, the labour force of 7.2 million accounted for 48% of the country’s population. Workers are employed in a range of industries including agriculture, banking, building, copper mining, and emerald mining. Fig. 1.1 shows the relationship between copper output and revenue from the sale of copper, the index for 2010 is 100. 140 130 120 110 index 100 90 80 70 60 2010 2011 2012 2013 2014 2015 2016 2017 Copper output Revenue from the sale of copper Fig. 1.1 Copper output and revenue from the sale of copper 2010—17 (index numbers) In 2017, Zambia’s central bank reduced commercial bank lending. This lowered investment and household borrowing. Government spending rose more slowly and some cuts were made to the government’s spending on training.

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