Despite positive, relatively broad-basedand stable growth record in recent years and immenseuntapped potential in agriculture, mining and services,Zambia's poverty rates have not declined significantlyand remain high. Income growth is limited by coordinationfailures such as poor access to domestic and internationalmarkets, inputs, extension services and information. Highindirect costs - most of which attributable toinfrastructure service-related inputs into productionincluding energy, transport, telecom, water, but alsoinsurance, marketing and professional service - undermineZambia's competitiveness limit job creation andtherefore serve as a major constraint to pro-poor growth.Continued real appreciation is another serious threat to thecompetitiveness of export-oriented and import-competingsectors and to job creation. For Zambia to stay competitiveand sustain the growth momentum it will be critical toimprove productivity - including the productivity of itslabor force, and to lower indirect production costs relatedto basic services. Carefully crafted monetary and fiscalpolicies will also be critical in responding to the realappreciation pressures. Improving the quality and access tosecondary and tertiary education is essential if the poorare to benefit from future growth of the non-farm economy.Weak governance and in particular poor governmenteffectiveness, are factors behind the market coordinationfailures and the identified government failures, and are assuch major obstacles to inclusive growth in Zambia.
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