Over the last decade, the Zambian government has implemented wide-ranging economic reforms to stabilise and transform the economy. Has structural reform had a positive or a negative impact upon poverty and inequality? Research by the UK Institute of Development Studies traces the effects of a range of economic policies on urban and rural households in Zambia. The study suggests that stabilisation gave rise to a sharp increase in poverty in the early 1990s. However, subsequent growth has reduced poverty, particularly in rural areas, although this has been accompanied by an increase in inequality.

Examining household data prior to and following the reform period, researchers studied the impacts of different policies on poverty and inequality throughout the 1990s. The changes observed, it should be noted, reflect the impact of weather shocks as well as economic policies. Devastating droughts in 1992 and 1994 deepened poverty in rural areas, although the effects were accentuated initially by the liberalisation of the maize marketing system. Other findings include:

• Removing maize price controls benefited farmers close to transport links but disadvantaged farmers living in remote districts.
• Poverty lessened substantially in rural areas due to rapid growth between 1996 and 1998 resulting in turn from liberalisation in the agricultural sector.
• Poverty increased dramatically in urban areas due to the recession induced in part by structural reforms and stabilisation policies targeting inflation.
• Recession affected urban households differently: those with access to formal sector incomes remained better off prompting a steep rise in inequality.

Looking to the future, suggestions for policy include:

• generating sustained growth in agriculture, where Zambia has a comparative advantage, is key to boosting the incomes of most of the poor
• investing in key public goods such as better rural infrastructure, marketing and agricultural extension services for poorer farmers
• encouraging investment in labour-intensive, export-oriented agro-processing industries to create urban employment and reduce urban poverty in the long-term
• developing effective safety-nets to tackle increased urban poverty in the 1990s.

Source(s):
‘Poverty, inequality and growth in Zambia during the 1990s’ paper presented at the 26th General Conference of the International Association for Research in Income and Wealth, Cracow, Poland by Neil McCulloch, Bob Baulch and Milasoa Cherel-Robson (September 2000) Full document.

Funded by: World Bank

id21 Research Highlight: 23 November 2000

Further Information:
Neil McCulloch
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: +44 1273 877223
Fax: +44 1273 621202/691647
Contact the contributor: n.a.mcculloch@ids.ac.uk

Institute of Development Studies (IDS), UK

Other related links:
Search Eldis for sources on poverty

IDS Poverty team