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Zambia: Poverty Assessment

Zambia FY95 PA

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Poverty Profile

Poverty in Zambia is serious and widespread. The 1994 Zambia poverty assessment states that, in 1991, about 69 percent of all Zambians were living in households with expenditures per adult equivalent below a level sufficient to provide basic needs.

Poverty prevalence in rural Zambia stands at 76 percent. It is more prevalent, deeper, and more severe than urban poverty. Rural poverty is more prevalent in remote provinces and is especially severe in remote districts within a province. The rural poor engage in agricultural activities -- primarily on semi-subsistence farming -- and rely mostly on family labor for agriculture production. Households with high poverty rates are, on average, larger, female-headed, and have high effective dependency ratios. Although the rural poor are less dependent than the urban poor on market-purchased food, the largest proportion of their household budget is spent on food.

The prevalence of urban poverty was negligible in the late 1970s, but it increased to just under 50 percent of the urban population in the 1990s. Urban poverty is diverse spatially. Most urban poor live in unplanned squatter settlements on the periphery of urban centers, where the lack of legal status and service provision constrain their productivity. Food and housing account for 97 percent of the total expenditures of the urban poor. As the formal sector continues to shrink, the majority of the urban poor engage in activities within the informal sector.

Both the urban and rural poor's welfare is negatively affected by malnutrition, poor health status, and low levels of education. Chronic malnutrition affects 47 percent of core rural poor households and affects 41 percent of the urban core poor. The currently unsustainable population growth rate is straining the capacity to deliver social services and also constraining households' coping ability by increasing already high dependency ratios.

Incentive and Regulatory Framework

The poverty crisis in Zambia is a result of long-standing inappropriate policies compounded by severe external shocks. Despite some partial and half-hearted attempts at adjustment during the 1980s, the situation worsened; the reforms were neither systematic nor sustained. Unemployment increased in urban areas, and rural terms of trade worsened as government tried to cushion the impact of external shocks on the urban population by keeping maize prices low and financing this subsidy by foreign borrowing. Zambia's policy was biased against agriculture and rural development, which meant that the country's potential for smallholder agriculture was neglected; consequently the sector was never able to contribute significantly to reducing poverty.

Building on renewed adjustment efforts started in the late 1980s, the current government has pursued an aggressive and comprehensive adjustment and stabilization program. Trade liberalization has lowered the price of key consumer goods and benefited the majority of Zambians. On the other hand, maize liberalization is a case where the experience so far has been mixed. On the positive side, smallholders are beginning to diversify their crop mix away from maize, reducing their vulnerability to drought and political interference in the maize marketing system. However, in many remote areas, the private sector has not taken up where the public sector left off, and where it has, private monopolies have often taken over. In the longer-run, in response to liberalization, there will have to be a shift out of maize in more remote areas. However, in the short-run, some intervention is needed to protect the most vulnerable, although the instruments are not well-defined yet. As long as real interest rates remain high, there will be a minimal private supply response.

This is also true for areas critical to poverty reduction—the informal sector and private sector marketing of maize and agricultural outputs. The main reason for high interest rates is continued government deficits and the resulting continuously high inflationary expectations. Cash budgeting must be further tightened and the parastatal loopholes closed. This must be combined with the continued protection of core expenditure items in the water and sanitation, health, and education sectors and in safety nets. Budgeting and disbursement procedures should be modified to avoid bottlenecks in the disbursement of allocated funds to service providers.

Public Expenditures

The report states that the continued decline in the economy has caused a squeeze on public expenditures and persistent government deficits for the last 20 years. Even with GDP growth of more than 5 percent a year, the debt-to-GDP ratio is likely to remain disturbingly high, leaving little room for maneuvering public expenditure policies without a major increase in revenues.

The report indicates that, in the 1980s, agriculture, infrastructure, and the social sectors suffered more than their proportional share of the fall in expenditures. Social sector spending declined sharply, with education bearing the brunt. The failure to increase social spending compounded by the bias in favor of tertiary services hurt the poor disproportionately.

The government is trying hard to ensure increased budget shares for social spending and to remove the bottlenecks to using allocations effectively. To reverse the decline in public expenditures on health and education, the government allocated a greater share to health and education in the 1994 budget and promised to protect these services during budget implementation. It also protected (in absolute terms) key areas within the social sectors such as non-personnel recurrent costs for primary services. In the 1994 budget, the allocation of Recurrent Departmental Charges in the health sector to each district was determined by giving a per capita allocation weighted by its population density.

In the 1995 budget, these weights will also include a poverty measure to ensure that poorer provinces receive larger per capita grants. The elimination of subsidies, which used to amount to between 15 and 20 percent of spending in the 1980s, shows the determination of the government to liberalize the economy. The subsidy removal has hurt the poor in the short run (by increasing the price of maize meal, which is now leveling off relative to other prices) but is necessary for setting the stage for growth and poverty reduction. However, subsidies to parastatals remain on the budget but are not shown as subsidies.

Safety Nets

Private safety nets (including kinship and church-based aid), which functioned relatively well in the past, have deteriorated with the decline of the economy. Two main target groups for safety net interventions have been identified within Zambia: the incapacitated poor (permanently vulnerable) and those with some productive capacity who are vulnerable to shocks.

Several successful programs cover the second group and have good potential for expansion. These include the follow-up program to the drought relief: the Program Against Malnutrition (PAM), Program Urban Self-Help (PUSH), and the activities of the Microprojects Unit (MPU). All three programs have been successful in giving transfers based on the payment of labor while providing infrastructure and improving service delivery systems. The relative success is probably attributable to a shared implementation philosophy of involving beneficiaries in the planning and implementation of the activities and of relying on local (both government and non-government) networks for monitoring and facilitation. The important differences in emphasis among the programs could make them complementary and cost-effective if their activities are well-coordinated at the central and district levels.

The only public sector program with significant potential for addressing the needs of the incapacitated poor is the Public Welfare Assistance Scheme (PWAS). The implementation philosophy is sound, relying on local committees for identifying the poor with auditing, guidance, and monitoring from the center. The activities reflects the poor's own perception that the indigent poor are a community responsibility, while the support for other groups is the responsibility of individual and kinship groups. PWAS has had problems in monitoring and targeting. Explicit guidelines should outline general principles while leaving the identification of the needy and the payment method to local committees. Currently, less than 1 percent of the national budget goes to this program.

Poverty Strategy

The ongoing reform process in Zambia is likely to foster growth and poverty reduction. However, unless specific actions are taken to enhance specific opportunities for the poor and to support their ability to respond to them, the decline in poverty will be slow and insufficient to satisfy the reasonable demands of the poor. Accelerating poverty reduction in Zambia requires consistent action in four main areas:

  1. The ongoing pro-poor reform elements must be sustained and deepened. This will require maintaining stabilization and liberalization policies, accelerating parastatal reform and the privatization program, encouraging private sector growth, and promoting a more efficient public sector. 
  2. Actions are required to increase the output and production activity of smallholders and to create market and transport linkages with urban areas. It is essential to facilitate smallholder agricultural growth by providing rural infrastructure and technology and supporting private marketing, storage, and processing. 
  3. It is essential to encourage human resource development to ensure that Zambians have greater access to quality education, health care, family planning, and nutrition services.
  4. A strategy must be developed to provide a safety net to vulnerable groups of the poor. To ensure that the benefits of such a strategy do indeed reach the poor, two activities must also be considered:
    1. The implementation of programs must be decentralized, integrated, and participatory
    2. A systematic monitoring system must be established

Statistical System

There have been several successful experiences with data collection and analysis, mainly funded by donors.

Government agencies such as the Central Statistical Office (CSO) have preferred to have the programs and projects proliferate to ensure the continued employment and increase benefits to their staff. The National Commission for Development Planning has to date not been able to coordinate data collection and analysis nor the monitoring of poverty. Even when data are collected, they are often not analyzed or not used in policymaking.

The government needs to ensure that poverty monitoring is done in an integrated, systematic manner using various research methodologies. A start has been made with the 1991 and 1993 Priority Surveys. Ongoing activities need to be coordinated, strengthened, and mainstreamed to ensure that they have a greater impact on policymaking. The report suggests that the government support the following measures:

  • Establishing a regular participatory poverty impact monitoring system;
  • Changing social statistics collection to one unified system of household surveys, institutional data collection, and sentinel site surveillance; 
  • Improving existing coordination mechanisms among data producers and users to facilitate the use of the data for policymaking; and 
  • Expanding policy-relevant research on poverty.

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