Poverty, Inequality and Growth in Zambia During the 1990s

Abstract

Since the early 1990s, the Zambian government has undertaken major economic reforms. A sharp stabilisation early in the decade was followed by reforms in agricultural marketing, a large privatisation programme, sweeping trade policy reforms and reforms to the public sector. This paper uses household survey data from 1991, 1996 and 1998 to chart the evolution of poverty and inequality during the 1990s. The economic policies pursued during the decade are described and linkages drawn between the policies implemented and the observed changes in poverty and inequality.

Our study finds a dramatic increase in poverty and inequality in urban areas between 1991 and 1996 due to stabilisation, the removal of maize meal subsidies, and job losses resulting from trade liberalisation and the privatisation programme. Between 1996 and 1998, despite economic recovery at the national level, the reduction in urban poverty and inequality has been small. In rural areas, drought devastated rural livelihoods in the early 1990s, while maize marketing reforms principally benefited those near the major urban centres, and hurt more remote rural farmers. Consequently there was little change in the overall poverty headcount for rural areas between 1991 and 1996 although there was a substantial reduction in rural inequality during this period. The rural sector experienced strong growth between 1996 and 1998 and this translated into a substantial reduction in poverty in rural areas between the two years. However, differential access to inputs, transport and marketing services has led to an increase in rural inequality. The paper also shows that it is growth (and recession) rather than distributional change which has been primarily responsible for movements in poverty during the 1990s. However, calculations of the annual growth rate necessary to halve the poverty headcount by 2015 suggest that Zambia is unlikely to meet this International Development Target unless policy reforms are capable of generating strong pro-poor bias to growth.