World Development, Vol. 19, No. 7, pp. 85 |-865, 1991. 0305-750X/91 $3.00 + 0.

00
Printed in Great Britain. © 1991 Pergamon Press plc

External Shocks and Adjustment in a Mineral

Dependent Economy" A Short-Run Model
for Zambia

STEVE KAYIZZI-MUGERWA*
University of Gothenburg, Sweden

Summary. - - Standard Dutch Disease analyses would suggest that mineral price declines reverse
the effects of mineral booms, in particular that the real depreciation caused by the fall in export
prices helps revive the traded sectors, notably manufacturing. Zambia's experience, however,
shows that the sectoral impacts of external shocks are much more complex. To investigate the
tradeoffs inherent in economic adjustment policies, including those currently advocated by the
International Monetary Fund (IMF) we use a multisector general equilibrium model. The study
shows that policies, even those directed at a specific sector, have indirect but not necessarily
benign effects on the rest of the country.

1. I N T R O D U C T I O N found that mineral affluence distorted govern-

In the first six or seven years that followed its
independence in 1964, Zambia had one of the
highest rates of economic growth in sub-Saharan
Africa. The trend was sustained by favorable
world market prices for its major export, copper.
International aid and capital flowed into the
country in substantial quantities and there was
reason for optimism.
Two factors at the end of the 1960s and
beginning of the 1970s reinforced this sense of
well-being: first, the government had quickly and
seemingly without difficulty taken over the main
commercial and industrial undertakings, the
"commanding heights" of the economy, and
second, the country had experienced a mineral
boom of unprecedented proportions in 1969.
Furthermore, there were prognoses for good
mineral prices for the forseeable future. Thus the
country seemed destined for rapid economic
growth.
Mineral affluence has not, however, always
proven a boon to mineral-rich countries. A surge
in mineral incomes tends to alter domestic
consumption patterns, especially those of the
urban classes, which acquire a large import
content thus exacerbating the country's foreign
dependence. The improvement in government
finances due to higher mineral revenues boosts
recurrent ..expenditure and weakens budgetary
discipline. In a study of Nigeria, Schatz (1977)
ment planning leading to hasty expansions of
investment targets and the abandonment of the
usual procedures of project appraisal. In
Zambia, the mineral boom of the 1960s led to the
institutionalization of subsidies to both urban
consumption and the parastatals. There was also
a strong belief at the time that the country could
import-substitute its way to industrialization
(Seidman, 1974). Any amount of expenditure
that would lead to the achievement of this goal
seemed justified. When copper prices fell, the
country was left with little room to maneuver as
the production and expenditure structures that
evolved in the boom era could not be changed in
the short run.
In studies of economic adjustment in mineral-
rich countries, discussion has centered on the
effects of "positive" external shocks, such as
increases in the world market prices for domestic
minerals. The standard result is that mineral
booms generate an increase in domestic demand,
*This paper is part of my doctoral dissertation for the
University of G6teborg, Sweden. I would like to thank
Arne Bigsten, Hhkan Persson and Lennart Hjalmars-
son for their advice, and Peter J. Neary and two
anonymous referees for their comments. Financial
assistance from International Development Research
Centre (IDRC) Canada, and the Swedish Agency for
Research Cooperation with Developing Countries
(SAREC), Sweden, is gratefully acknowledged.

851
852 WORLD DEVELOPMENT
but since the small-country assumptions ensure
an unlimited supply of tradables from abroad,
domestic prices of these goods are not affected.
The prices of nontradables, however, rise in
response to increased demand. The resultant
shift in relative prices or appreciation of the real
exchange rate causes a movement of resources
from tradables to nontradables. Depending on
whether the tradable sector is manufacturing or
agriculture, this process is referred to as deindus-
trialization or deagriculturalization. These
"'Dutch Disease" analyses (see for instance
Alam, 1982; Edwards, 1984; Kamas, 1986) give
the impression that mineral busts could be
assessed as the symmetrical opposites of mineral
booms.
Mineral or resource declines in such countries
as Zambia and Nigeria (Collier, 1987; Andersson
and Kayizzi-Mugerwa, 1989; Kayizzi-Mugerwa,
1990), have not, however, reversed the decline of
the manufacturing sectors, nor has agricultural
activity been revived. Furthermore, the con-
sumption patterns adopted during the boom
years continue to characterize much of the
economic activity, with the partiality for im-
ported and luxury goods undiminished.
The dynamics of mineral dependence would
thus tend to favor an analytical approach which
recognized the complimentarity between the
encashment of mining rents and the production
of other income in the economy (Lewis, 1984).
As the main source of exports, the mining sector
has a foreign exchange effect on the rest of the
economy. 1
Further, though the most interesting aspects of
the Dutch Disease model involve its general
equilibrium implications for the economy, empir-
ical applications are often based on time-series
analyses of such variables as the real exchange
rate. Conclusions regarding the sectoral impacts
of the change in mineral prices are thus only
implicit.
In this study we analyze the impact of external
shocks on the Zambian economy and the effec-
tiveness of adjustment policies using a multi-
sector general equilibrium model. The
framework enables comparison of outcomes
from alternative shock and adjustment policy
scenarios. Emphasis is laid on the sectoral im-
pacts and tradeoffs inherent in adjustment
policies recommended by the International
Monetary Fund (IMF).
The paper proceeds as follows: Section 2 is an
overview of Zambia's experience with mineral
decline. Focusing on the period 1978-88, we
show that the fall in mineral prices has affected
all aspects of the economy. Sections 3 and 4
present a multisector general equilibrium model
for Zambia (ZMS) and outline a solution algor-
ithm. Section 5 presents the data and parameters
used to validate the model and Section 6 presents
the results. The paper ends with a policy analysis
and brief conclusion in Section 7.
2. M A N A G I N G ECONOMIC DECLINE IN
Z A M B I A 1978-88
The years following the oil crisis of 1973-74
have been a period of unimpeded economic
decline in Zambia. It was not, however, until
1978 that the government abandoned the earlier
policies which had sought to maintain the status
quo in the face of an externally induced and
irreversible structural shift from mining activi-
ties, and started formulating policies to cope with
the severe economic downturn. As crises nmlti-
plied, the IMF became a frequent, but controver-
sial, partner in the formulation of economic
policy. The main macroeconomic features of
1978-88 are discussed with the help of Table 1.
Zambia's economic performance over the
period 1978-88 has been worse than mediocre.
Table 1 shows that real output increased on
average by only 0.6% per year, thus per capita
income fell on average by - 3 . 1 % per year. The
poor performance of the mining sector (MN) is
largely to blame for the economic setback.
Output measured in tons has been falling since
1975 though with some improvement at the end
of the 1970s. The structural and cost problems in
mining, coupled with declines in ore quality,
however, have hampered performance and re-
duced employment. On the few occasions when
the sector has shown an improvement, for
instance in 1980, 1982 and more recently, 1987-
88, the cause has been an increase in inter-
national prices for copper and not an increase in
output. Domestic economic problems, including
shortages of spare parts and lack of new invest-
ments and managerial staff, have prevented the
sector from taking advantage of the improved
copper prices.
Another feature of the ec0nomy during these
years has been the decreasing rate of investment.
Table 1 shows that in 1978 the ratio of investment
to GDP (GFC) was a respectable 19%, though
even this was a substantial decline from the 29-
30% of the mid-1960s. The domestic rate of
capital formation has since fallen, reaching levels
below 10% after 1984. This decline is a result of
the nation's attempts to preserve high levels of
both private and government expenditure even in
the face of overall economic contraction. The
impact of this drastic decline in capital formation
can already be seen in the deteriorated physical
 Table 1. Indicators of macroperformance 1978-88 (percentage growth*)

Year 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

GDPt 1.9 7.7 3.5 4.7 -2 1.7 -1.3 2.5 0.5 -0.1 2.7
MN$ 0.8 -9.7 3.6 -8.1 5.9 -1.8 -9.8 -7.1 -5 1.3 2
GFC§ 19 17 18.2 17.5 17.2 15 12.8 9.7 8.2 7.8 10.2
ERII 0.97 0.97 0.97 0.97 0.97 0.78 0.55 0.25 0.11 0.12 0.125
MI¶ 1.3 31 -0.7 10.5 21.2 39 11 41.7 87.3 40 7 Z
>
PI** 11.5 11.3 11.5 10.4 13 18 21 33 58 54 46
P2tt 16 9.6 11.7 14 12.5 20 20 37.5 52 43 59 0'9
.r
GD$$ 5.2 8.8 25.2 15.3 15.5 7.8 7.4 14.4 17 15.2 11.1
F§§ -33 -23 -27 -33 -40 -47 -54 -93 -112 -60 -48 0

Sources: >
Bank of Zambia (various issues). Z
~7
Government of Zambia (various years).
Government of Zambia (1989). >
Central Statistical Office (CSO), Monthly Bulletin of Statistics (various issues).
*Except for ER, GFC, GD, and F, which are ratios, the rest of the variables are expressed in percentage annual growth rates. uo
tGDP = real gross domestic product (1977 prices). ,q
SMN = real mining output.
§GFC = gross fixed capital formation (percentage of GDP). Z
,H
[[ER --- exchange rate (US dollars per kwacha).
¶M1 = money supply (currency outside banks plus demand deposits).
**P1 = consumer prices (urban high income).
ttP2 = consumer prices (urban low income).
:[:,GD = government's budgetary deficit (percentage of GDP).
§§F = net foreign assets (percentage of GDP).
854 WORLD DEVELOPMENT
infrastructure, worn-out machinery and weak
construction sector.
For a long time Zambia preserved a fixed
exchange rate. One of the assumptions of the
Third National Development Plan (TNDP) of
1980-84 was that the exchange rate (ER) would
remain fixed at its 1978 level. This was, however,
not possible as the structural adjustment program
agreement reached with the IMF and World
Bank in 1983 marked the start of a period of
drastic economic changes which culminated in
the auctioning of foreign currency. In the course
of five years, 1983-88, the kwacha's official value
fell by 85% against the US dollar. In the auction
period, the kwacha traded briefly at 21 to the
US dollar. In May 1987, Zambia reverted to
the fixed exchange rate, although a small
devaluation was effected in the latter half of
1988.
Zambia's economic management was, in this
period, focused more on containing the burgeon-
ing economic chaos than on plotting new policy
alternatives. On the one hand, the budgetary
deficits (in Table 1 measured as ratios of GDP)
were increasing the demand for domestic credit
and, via the Bank of Zambia, the supply of
money. On the other hand, these pressures were
pushing up inflation and eroding domestic in-
comes. It is noteworthy that during the life of the
IMF adjustment packages, both the size of the
relative budget deficits (GD) and the rate of
growth of money (M1) increased. In particular,
money supply grew at the rate of 41.7'70 in 1985
and 87.3% in 1986. Lower growth rates were
actually not recorded until the IMF package had
been abandoned. Inflation increased at an alarm-
ing rate, reaching a peak in 1986-87. There were
differences between the evolution of prices for
the higher urban income groups (PI) and those
for the lower urban income groups (P2). Most
notably, although prices for higher income
groups were, until 1985, generally lower than
those for lower income groups, the auction
started in that year seems, via depreciation of the
currency, to have had a greater impact on the
consumer price index for higher income groups in
1986 and 1987 (see Table 1). Reversion to a fixed
exchange rate dampened the growth of P1, but
increased that of P2.
The economy also became increasingly in-
debted during this period. Table 1 shows that the
ratio of net foreign assets to G D P (F) increased
in absolute terms during most of the period.
From 1983, this ratio rose sharply. The IMF
packages embarked upon in that year actually
increased the nation's obligation to service its
debt and the outstanding arrears. Zambia thus
saw not only a big outflow of foreign funds in
1986 via the auction, but also increasing pressure
on the currency as fears arose that the system was
not sustainable in the long run.
In May 1987, the government decided to
discontinue its arrangements with the IMF. It felt
that the Fund's policies were unrealistic and
incapable of removing the country from econo-
mic turmoil. Instead a New Economic Recovery
Program was launched with the aim of bringing
about growth from the country's own resources.
The new policies were similar to the "'command
economy" approaches of the 1960s and early
1970s. Imports and exports were once again to be
controlled, liberalization of prices and interest
rates was abandoned and a moratorium was put
on debt servicing. Though the policies gave the
economy a semblance of stability, the broader
issues are still unresolved. These are: (a) how
best to restructure thc economy away from its
traditional dependence; (b) how to evolve an
incentive structure that is able to bring about this
transformation: and (c) how to distribute, among
the disparate sectors and social groups, the
inevitable burdens of adjustment.
3. A M U L T I S E C T O R E Q U I L I B R I U M
M O D E L F O R Z A M B I A (ZMS)
The model described below, based on the
general equilibrium framework, is used to study
the impact of external shocks on the Zambian
economy and to evaluate the effectiveness of
adjustment policies.
The use of general equilibrium models in
analyses of the economic problems of developing
countries has been popularized by, among
others, Dervis et al. (1982). Although the models
are quite sophisticated, many are variants of
Johansen's multisector growth (MSG) frame-
work from 1960. In a recent study, Cordon,
Carbo and de Melo (1985) use the framework to
study the Chilean economy which, though to a
lesser extent than Zambia, is dependent on the
copper sector.
The model builds on features associated with a
market economy, the most important being the
adjustment of both factor and goods' prices to
bring about equilibria on the respective markets.
Individually optimizing agents are also assumed,
thus producers maximize profits and consumers
their utility. It is, however, important not to
forget that the problems Zambia faces today are
partly a reflection of the economy's structural
and institutional rigidity. These include a fixed
urban wage floor, controlled producer prices,
and a huge rural-urban gap. Attempts have been
 EXTERNAL SHOCKS AND ADJUSTMENT 855

made to incorporate these features in the frame- (e) Domesac prices

work.
We have divided the Zambian economy into p, = ~ ' + (1 - g3p~ (13)
seven sectors as follows: agriculture; mining;
manufacturing; construction; commerce; trans-
port and communications; and services. Each (f) Equilibrium conditions
sector is an aggregation of related subsectors (see
Kayizzi-Mugerwa, 1988, p. 109 for the aggrega- q~= 5" a i j q j + ci + g i 4- z i + e i - - mi (14)
i
tion scheme). The rural-urban divide was por-
trayed simply. We assumed that agriculture q; = q~ (15)
represents the rural sector while nonagriculture is
mainly urban. The informal sector was incor- /~'1 Z Lb I~ 2 = Z Lzj (16)
i J
porated into the service sector.
Our model is characterized as short run be- 3" ~ i m i - p~ei) - /) = 0 (17)
l
cause the sectoral capital stocks are assumed to
be sector specific. Only labor is mobile. Current
investments do not, as a result, add to short-run As expressed in subsection (a), we assume Cobb-
production capacities. The short run in the model Douglas production technology with a sector
is estimated to be 1-2 years. specific factor, capital (Ki) , and two labor cate-
The model is presented in six interrelated gories, skilled and unskilled (L1) and (L2), as in-
blocks below2: puts and ¥i, cq and ~i a r e constants. Wage
levels ((ok) rise and fall with changes in the labor
market. To account for the persistent sectoral
(a) Production, wages and value added wage differentials in Zambia (i.e., the gaps
between mining, manufacturing, service sector
(1) and agricultural wages), we have assumed sector-
specific wage-shifting constants (~ki) for each
Wlj = O.}ll,VIj W2j = 0321~2/ (2) skill category. Value added per unit of sector j's
n d output, p~, is defined as prices for domestically
pj = p j - Z piaij
(3) produced commodities, p~, net of costs for
intermediates; pj denotes domestic market
prices.
(b) Factor demands Subsection (b) defines labor demands, which
derive from the cost minimization condition in

L~i =
(pjn~j~j(Wlj~j)[3j~l (l--ctj
wljLli/W2jL2i = aj/[~j

- - ]
[3j)
Ki
(4)

(5)
equation (4). Demands for the two skill cate-
gories are shown to be functions of sectoral
wages, value added, the sector-specific factor,
\ Wlj \ W2jO~j ! / capital, and the parameters of the production
function.
In subsection (c), we present the demand side
L2j = - - K) (6) of the model. Public consumption (gi) and
\ W2j \ Wlj(lj ] investment demand for commodity i, (z 3, are
exogenously given and are used as policy
parameters. We thus give no explicit definitions
(c) Investment, public and private consumption of savings and tax rates.
In macroeconomic models, however, "closure"
zi = 2i (7) rules have had some prominence, with questions
g,. = g,. (8) revolving around the choice of mechanisms to
equate total savings with total investments (see
Ci = Coi 4- ( o i l p i ) (Y - Z cOkpk) (9) for instance Ratts¢, 1982). The solution algor-
k
ithm used below adopts the original Johansen
closure, where aggregate private consumption is
(d) Exports and imports altered to ensure equilibrium.
To derive private demand functions for
ei = e~(p~i/Pia)~' (10) sectoral outputs, (c~), we have assumed that the
(11) utility function of a representative household is
mi = Di(q~ -- ei) of the Stone-Geary type. 3 It can be shown that
O. d l t m gt~ (12) maximization of this function subject to a budget
~i = ['l'i(pilpi)
856 WORLD DEVELOPMENT

constraint yields a linear expenditure system supply. As a second step, therefore, the level of
(LES) denoted by equation (9), where coi is the total private consumption is adjusted to ensure
committed or subsistence demand for commodity that this is the case.
i, ai is the marginal budget share, with Zia, = The first two steps comprise the "inner loop'"
1, and Y is aggregate private consumption. of the algorithm. The "outer loop" adjusts prices
Subsection (d) defines foreign trade. In in the following way. The general price level is
Zambia the bulk of imports are intermediates changed with respect to deviations of the trade
and mostly noncompetitive. We have thus chosen balance from some exogenously determined
simple formulations for the trade equations. "sustainable" level. Sequentially, prices are also
Exports, e;, are functions of relative prices, the adjusted to eliminate excess demand for com-
reference period's export volumes (e',?) and the modities. This is done by adjusting the price of
export elasticity (ci). Imports, rn,, are related to commodity i by a constant fraction of its own
domestic demand by an import share or domestic excess demand.
"user" ratio, gi, When imports are completely The algorithm just described is presented in
insensitive to changes in relative prices, this ratio Figure 1.
is constant.
When domestic demand shows some respon-
siveness to changes in the relative prices of 5. DATA DESCRIPTION AND MODEL
imported goods, however, the ratio can be ex- IMPLEMENTATION 4
pressed as in equation (12), where ~t~] is the
"user" ratio in the reference period, ~t~i is a (a) Sectoral outputs
measure of domestic responsiveness to relative
prices or the import elasticity and pm is the level The data used in the applications are from
of world market prices for imports. 1980. The main data set is a Zambian social
Subsection (e) expresses domestic market accounting matrix (ZSAM) compiled from a
prices as weighted averages of domestic produc- variety of statistical sources. Most of the crucial
tion costs, or domestic producer prices, and parameters for the initialization and solution of
world market prices, with import shares in the model are derived from ZSAM. In Table 2
domestic absorption as weights. we can look at the structure of production in
Finally, subsection (f) describes the equili- 1981).
brium conditions for the model characterized by Table 2 shows that in terms of contribution to
the equality of aggregate demand to aggregate
supply, clearance of markets for the two labor
categories and the fulfillment of the trade con- "Guess" at Prices 14
straint, where /~ in equation (17) is some
exogenously determined level of the trade
deficit. / Wage Levels ~ Adjust
Wage
i Labor Market [ No Levels
4. SOLUTION OF THE MODEL Balance'? ]
Adjust
Prices for domestically produced goods, p'/, Yes ~'q Adjust ['rices
together with world market prices and trade i Aggregate Supply [ N [ Total Private
Consulnption
elasticities determine market prices, Pi, and value equal to o , (y)
added per unit of output, p~. An equilibrium is a Aggregate Demand?
vector of prices, pJ, wage levels ~oI and o)2 and a Yes
level of total private consumption, Y, that satisfy
equations (14)-(17). Trade Balance
Constraint No
Solution of the model is based on an iterative Fulfilled and
procedure which uses known properties of the Excess Demands
various functions defined above. As a first step, For Goods Zero'?
we take a "guess" at prices and adjust wage levels
"~Es [
to achieve balance on the labor market. This
gives us a temporary vector of commodity E X 1T
supplies.
There is at this juncture, however, no guaran- Figure 1. F/ow chart of a solution algorithm ]br the
tee that aggregate demand equals aggregate model.
 EXTERNAL SHOCKS AND ADJUSTMENT 857

Table 2. Gross, net output and intermediate demand 1980 (millions of

kwacha)

Gross Intermediate Net Net percentage

Sector output demand output of gross

Agriculture 507.3 106.6 400.7 79

Mining 1,152.8 652.5 500.3 43
Manufacturing 1,329.6 766.6 563 42
Construction 232.5 113.8 118.7 51
Commerce 518.6 157.4 361.2 70
Transport and
communication 378.8 229.7 149.1 40
Services 1,558 677.3 880.7 57
Total 5,677.6 2,676.9 2,973.7 52.4

Source: ZSAM CSO (1985b).

net output, service sectors (commerce, transport Table 3. Factor and labor skill coefficients
and communications, and services) dominate the
economy, claiming 47% of the total. Manufactur- Sector Labor Skilled Unskilled Capital
ing contributes less than 25% of total net output,
with the share of mining at 17%. Bearing in mind Agriculture 0.16 0.04 0.12 0.84
that a majority of the population still depends on Mining 0.62 0.19 0.43 0.38
agriculture for livelihood, its share is a dismal Manufacturing 0.39 0.33 0.06 0.61
13.5%. Gross agricultural output is often split Construction 0.46 0.18 0.28 0.54
into commercial and subsistence outputs. In Commerce 0.39 0.04 0.35 0.61
1980, the commercial sector had an estimated Transport and
share in total agricultural output of 30%. communication 0.77 0.3 0.47 0.23
Services 0.65 0.57 0.08 0.35
Average 0.57 0.3 0.27 0.43
(b) Factor shares 5
Sources: ZSAM and Kayizzi-Mugerwa (1988).
Labor shares in value added were derived by
dividing sector i's wage bill by the sector's total cities, we used cross-sectional data from the
value added. Using earnings and employment Household Budget Survey of 1974-75 (CSO,
data, we were also able to estimate the shares of 1980). Since consumer commodities differ from
the two skill categories in each sector i's value sector divisions (i.e., food is produced both by
added. The profit share was derived as a residual. the agricultural and manufacturing sectors),
This meant, unfortunately, that since agricul- however, the "true" expenditure elasticities were
ture's total wage bill is small compared to derived after mapping consumer goods onto their
population, it appears that most of the income in sectors of origin. 6 The sectoral Engel elasticities,
the sector goes to profit earners. Most of these Eyi, subsistence consumption, c0i, the marginal
"profits," however, are actually incomes accruing propensity to consume, oi, and the budget
to peasant farmers who in official statistics are shares are given in Table 4.
assumed to be self-employed. The factor shares
for labor, divided into skilled and unskilled
categories, and capital are given in Table 3. The (d) Trade elasticities
shares in this table are used as coefficients in the
production functions. The trade elasticities were extracted from
econometric studies of Zambia in particular and
developing countries in general (see for example,
(c) The linear expenditure system Adams and Behrman, 1982; Markowski and
Radetski, 1986; Rittenberg, 1986). In obvious
Coefficients for the private consumption func- cases we relied on "guesstimates," for instance,
tion were derived with the help of a linear we assumed that the import elasticities for copper
expenditure system. To estimate the Engel elasti- (mining) and construction were zero. The elastb
858 WORLD DEVELOPMENT

Table 4. Coefficients for the linear expenditure system Z a m b i a n experience. W e begin by p r e s e n t i n g the
reference scenario on which s u b s e q u e n t results
Sector E~i* o~t cjY$ co,§ are c o m p a r e d . T h e reference run was u n d e r t a k e n
with the following assumptions: world m a r k e t
Agriculture 11.45 0.105 1t.233 301.6 prices r e m a i n fixed at their 1980 levels - - in
Mining 1.56 11.0(13 I).01118 0.49 effect we n o r m a l i z e all foreign prices to one. T h e
Manufacturing 1.1 (I.52 11.474 357.78 trade deficit is fixed at 200 million kwachas and
Construction . . . . the rest of the p a r a m e t e r s r e m a i n fixed at their
Commercc 1.1 0.105 0.095 71.04 1980 values. A s s u m i n g the short run to be two
Transport and years long, we are in effect solving for the year
communications 1.16 0.033 0.029l 21.12 1982. s
Services 1.4 0.234 0.1671 83.72
T a b l e 6 shows that in the reference solution the
bulk of imports are m a n u f a c t u r e s , mostly
Source: Kayizzi-Mugerwa (1988). d e s t i n e d for i n v e s t m e n t s a n d i n t e r m e d i a t e con-
*E,.i = Engel elasticities. s u m p t i o n . E x p o r t s are d o m i n a t e d by minerals,
to, marginal propensities to consume. with some exports from t r a n s p o r t a n d c o m m u n i -
$cjY - budget share for expenditure category i.
§c,~, - subsistence or necessary consumption levels for cations. Relative to o u t p u t , h o w e v e r , exports of
good i. m a n u f a c t u r e d goods are r a t h e r small. The
b r o a d e r outlines of the reference solution do not
differ m u c h from Z S A M . F u r t h e r , most of the
cities used in the i m p o r t a n d e x p o r t functions are skilled labor is in the public sector while the bulk
p r e s e n t e d in T a b l e 5. of the unskilled is in agriculture. T h e r e is a
T h e relatively large c o n s t a n t in the i m p o r t substantial gap b e t w e e n skilled a n d unskilled
function for m a n u f a c t u r i n g is i n t e n d e d to c a p t u r e wages. This gap is, as o n e would expect, widest in
the huge v o l u m e of i m p o r t e d i n t e r m e d i a t e s t h a t agriculture a n d services w h e r e unskilled wages
traditionally is a s s u m e d not to be too responsive are 2%, and 5 % , respectively, of skilled wages.
to c h a n g e s in relative prices. W e have also m a d e For the rest of the e c o n o m y the p e r c e n t a g e s are
the t r a d e elasticities for service sectors especially 30°/,, for mining, 18% for m a n u f a c t u r i n g , 13%
low to p r e s e r v e o u r analogy of t r a d a b l e s a n d for c o n s t r u c t i o n , 32% for c o m m e r c e , and 16.5%
nontradablesf for t r a n s p o r t a n d c o m m u n i c a t i o n s . T h e sectors
with the highest c o n c e n t r a t i o n of unskilled
laborers also have the largest gaps b e t w e e n
6. R E S U L T S wages for the two skills.

(a) The reference run

(b) External shock scenarios
In this section we p r e s e n t the m a i n results,
b a s e d on a n u m b e r of scenarios from the W e shall now look at the impact of b o o m s a n d
busts on the e c o n o m y within the f r a m e w o r k of
o u r model. In b o t h cases the features of the
Table 5. Import and export coefficients and elasticities r e f e r e n c e scenario are r e t a i n e d with two excep-
tions: for the B O O M , m i n e r a l ( c o p p e r ) prices
Sector p.~* ~tlt ?,'$ Ei§ are a s s u m e d to rise by 2 0 % , a n d for the B U S T to
fall by the same a m o u n t ( 2 0 % ) . T h e results are
Agriculture 0.2 l. 1 12.1 1.5 p r e s e n t e d in T a b l e 7 as p e r c e n t a g e deviations of
Mining 1).0 11.0 1,1t64 11.07 results of these two scenarios from those of the
Manufacturing 0.7 1.1 5(1 2.1 r e f e r e n c e run.
Construction 0.0 0.0 0.0 0.0 A 2 0 % increase in c o p p e r prices ( B O O M ) ,
Commerce 0. l 0.01 I 1.3 0. l
ceteris paribus, has a clearly negative impact on
Transport and
communication 0. l 11.01 84.5 0.1 m a n u f a c t u r i n g output. This is a c c o m p a n i e d by a
Services 0.1 0.01 34.7 0.1 fall in m a n u f a c t u r e d exports, which are fairly
m o d e s t to begin with. It is w o r t h noting that a
mineral price b o o m does not increase mineral
Source: ZSAM in appendix.
*~t~,' = constant in the import function (user ratio in o u t p u t . This is p r o b a b l y because costs rise
reference period). dramatically in the sector. In fact the e c o n o m y -
+~tI = import elasticity for good i. wide increase in p r o d u c e r prices is b e t w e e n 13
$?] = constant in the export function. 21%. I m p o r t s of m a n u f a c t u r e s increase by 20%
§E, = export elasticity for good i. and private c o n s u m p t i o n of m a n u f a c t u r e s by the
 EXTERNAL SHOCKS AND ADJUSTMENT 859

T a b l e 6. Reference solution (world prices = 1 in 1980)

Sectors
1 2 3 4 5 6 7

Domestic supply
Output 504.74 1,143.79 1,351.93 216.49 506.21 373.02 1,632.59
Imports 5.41 -- 1,339.09 . . . .
Domestic demand
Intermediates 108.03 29.42 1,288.58 70.54 281.09 243.39 470.53
Consumption
-- Private 386.04 2.87 870.03 -- 144.97 47.62 256.23
-- Public . . . . . . 886
Investment 1.9 56.4 436.6 .146 72.4 0 0
Exports 10.74 1,057.17 89.47 -- 9.15 82 29.5
L a b o r (million h o u r s )
- - skilled 6.71 24.53 14.82 5.65 3.41 11.48 223.53
-- unskilled 903.38 185.71 156.83 72.22 88.39 107.9 757.3
Prices a n d w a g e s
Market prices 1.08 1.1 0.88 0.93 1.24 1.08 1.18
Producer prices 1,08 1.1 0.76 0.93 1.24 1.08 1.18
Skilled w a g e s 2.82 5.12 5.07 3.74 5.63 5.02 3.43
Unskilled wages 0.06 1.56 0.91 0.48 1.8 0.83 0.16
W a g e levels
Skilled 5.12
Unskilled 1.56

T a b l e 7. Boom and Bust Scenarios*

Private Producer
Sectors Output consumption Exports Imports prices

BOOM
1 0 4.3 -24 24 20
2 0.2 16 0 -- 20
3 - 13.5 20 -23 20 13
4 0 -- -- -- 18.3
5 0.7 10 -16 -- 19
6 -3 12 -15 -- 17.6
7 2 12 -18 -- 21
BUST
1 0 2.8 -13 14 10
2 -2 11 -2 -- 8
3 -7 11.3 -13 10 6.6
4 0 -- -- -- 9.6
5 1 6.2 -10 -- 9.7
6 -2 7.6 -8 -- 9.2
7 1.2 7.8 -10 -- 11

* F i g u r e s a r e p e r c e n t a g e d e v i a t i o n s f r o m the r e f e r e n c e r u n .
tl = Agriculture
2 = Mining
3 = Manufacturing
4 = Construction
5 = Commerce
6 = T r a n s p o r t a n d communications
7 = Services.
860 WORLD DEVELOPMENT
same amount. Output of services increases by
2% while that of transport and communications
decreases.
The analogy to the Dutch Disease model
seems straightforward. A b o o m is here shown to
depress activity in the manufacturing sector.
Services expand but transport and communica-
tions decline. This decline is partly a reaction to
the fall in manufacturing activity. Significantly,
agriculture is unaffected by the increase in
mineral prices. This is, perhaps, because the
sector is detached from the mainstream. Also the
short run might be too brief a period for the
sector to alter its production.
We now look at the impact of a 20% fall in
mineral prices ( B U S T ) on the economy. It is
interesting to investigate whether a bust, in
contrast to the b o o m , has a stimulating effect on
the manufacturing sector. A fall in mineral prices
decreases mining output by 2% and exports by
the same amount. Manufacturing output falls
even in this scenario (by 7°/,,). Though in relative
terms the negative effects of a boom on manufac-
turing exceed those of a bust, and hence the
Dutch Disease case is not necessarily weakened,
the fall is nevertheless significant. It is likely that
the Dutch Disease explanation neglects the
foreign exchange effects of a fall in mineral
prices. While during the course of a boom, the
foreign exchange constraint is r e m o v e d , and
Dutch Disease type effects take place as imports
are boosted, a bust tightens the constraint,
affecting those sectors that are dependent on
imported intermediates such as manufacturing.
There might thus be simply no symmetry
between, on the one hand, the effects of a b o o m
and, on the other, those of a mineral price
decline on a mineral dependent economy.
(c) Ad]ustment scenarios
We shall now look at the impact of three
adjustment policies. Mineral prices are assumed
to fall by 20% in all experiments. In the first
instance ( F I S C A L I ) , we assume that the govern-
ment embarks on a fiscal expansion to counter
the effects of the decline of mineral pricesJ *
G o v e r n m e n t expenditure increases to one billion
kwacha, an increase of 13% from the reference
run. In the second run ( F I S C A L 2 ) we look at the
impact of a fiscal contraction. H e r e government
expenditure is reduced by 21% from the refer-
ence run to 700 million kwacha. In the third and
last experiment ( B A L A N C E ) , we look at the
effects of reducing the trade deficit from 200
million kwacha to zero. This is an obviously
extreme case to illustrate the pressures on a
country which has seen a sharp decline in its
creditworthiness. This also illustrates the possible
sectoral effects of IMF-type policies that empha-
size reductions in the trade deficit. In our model,
the exchange rate is endogenous, thus prices
change in the system to maintain an exogenously
determined trade deficit. By comparing the level
of domestic and world prices across equilibria,
one can deduce the rate of devaluation that was
necessary to arrive at the new equilibrium.
Results for the three adjustment scenarios are
presented in Table 8.
As Table 8 shows, a fiscal expansion leads to
decreases in sectoral output for all sectors except
construction and services. C o m p a r e d to the
B U S T scenario, agricultural output falls even
more in F I S C A L 1 . The largest fall in output by
far is registered in the manufacturing sector. Due
to the inflationary impact of a fiscal expanskm,
there is an across-the-board reduction in exports,
and correspondingly, there is an increase in
manufactured imports. Both p h e n o m e n a are the
results of the appreciation of the real exchange
rate, i.e., the increase in the ratio between
domestic and world prices.
A fiscal contraction ( F I S C A L 2 ) has, in a
number of respects, a reverse impact on the
economy to that of an expansion. The output of
services falls by 2%, and mineral output and
exports both fall by 1.3%. Agricultural and
manufacturing outputs, however, increase as well
as production in c o m m e r c e and transport and
communications. Most notably, the costs of
production are lower than in either B U S T or
FISCAL1.
Looking at the effects of a reduction of the
trade deficit ( B A L A N C E } , we see that the
economy goes into the equivalent of a recession.
Apart from the modest increase in manufacturing
output, other sectors show small or no increases
in production. Onc can also note that the less
tradable the sector, the smaller the impact on it
of a trade deficit reducing strategy, m Agricul-
tural and manufacturing exports increase by
7-10% and those of commerce, transport and
communications by 3 - 5 % . Manufactured im-
ports are reduced by 5% and agricultural imports
by 7%.
Thus to achieve a balance of trade would
demand a profound shift in relative prices. This is
shown by the across-the-board decrease in
domestic prices or sectoral costs of production
( 3 - 6 % ) in the B A L A N C E experiment.
7. C O N C L I ! S I O N S
In this study, we have used a short-run
 EXTERNAL SHOCKS AND ADJUSTMENT 861

Table 8. Adjustment policy scenarios*

Private Producer
Sectors? Output consumption Exports Imports prices

FISCAL1
l -2.5 1 -14 0 10
2 -2.4 0 -3 -- 23
3 -17 4.4 -34 10 10
4 1 -- -- -- 24
5 -3.4 0 -15 -- 17
6 - 6 0 - 17 -- 20
7 5 -11 -26 -- 35
F1SCAL2
1 1.5 3.9 0 0 3.7
2 -1.3 21 -1.3 -- 5
3 3.6 12.6 35.6 4.4 0
4 0 . . . . 4
5 2.8 11 0 -- 0
6 2.1 12 1 -- -3
7 -2 21 8 -- -8
BALANCE
1 -0.5 -0.6 9.9 -7 -6
2 -1 -3.5 -1.2 -- -4.5
3 3 -4 7.5 -5 -4
4 0 . . . . 4.4
5 0 -2 4.5 -- -5
6 0.5 3 4 -- -4
7 0.1 -3.4 3.8 -- -3.4

*Figures are percentage deviations from the reference run.

t l = Agriculture
2 = Mining
3 = Manufacturing
4 = Construction
5 = Commerce
6 = Transport and communications
7 = Services.

multisector general equilibrium m o d e l (ZMS) to is relaxed and the control m e c h a n i s m s are

study the impact of external e c o n o m i c distur-
bances on Z a m b i a and the effectiveness of
a d j u s t m e n t policies. Z M S provides a n u m b e r of
static solutions with which one can assess the
impact of external shocks and a d j u s t m e n t poli-
cies. In e x p e r i m e n t s , the cases are stylized to
enable easy i n t e r p r e t a t i o n and relation to the
current d e b a t e on I M F - t y p e a d j u s t m e n t pack-
ages.
A s in the D u t c h Disease f r a m e w o r k , a mineral
b o o m was seen to depress activity in manufactur-
ing. The main cause of this was the appreciation
of relative prices caused by the b o o m . Agricul-
ture is, h o w e v e r , relatively unaffected by the
upward shift in mineral prices. A mineral bust
was e x p e c t e d to have an o p p o s i t e effect to the
b o o m . We n o t e d , h o w e v e r , that even here
manufacturing activity falls. We argued that
during the b o o m the foreign exchange constraint
lowered. O n the o t h e r h a n d , a mineral price
decline reduces foreign exchange availability and
tightens the control m e c h a n i s m s . A d r o p in price
hurts a sector such as manufacturing w h o s e
p r o d u c t i o n is import d e p e n d e n t . The s y m m e t r y
of the D u t c h Disease f r a m e w o r k would only be
valid in a less rigid world.
A fiscal e x p a n s i o n was seen to increase, not
surprisingly, the p r o d u c t i o n of services but led to
a fall in o t h e r production and a relative decrease
in private c o n s u m p t i o n . In t e r m s of output, a
fiscal contraction in the face of a mineral price
decline p r e s e n t e d a b e t t e r scenario. E x c e p t for
mining and services, sectoral output was in-
creased. In b o t h the fiscal expansion and contrac-
tion cases, the result is d e p e n d e n t on the extent
of the change in relative prices or the real
exchange rate. W e also saw that bringing the
trade deficit d o w n to zero entailed lower imports,
862 WORLI) DEVELOPMENT
a lower level of private c o n s u m p t i o n and a low
level of sectoral output. T h e r e also is an overall
d e c r e a s e in p r o d u c t i o n costs. This real deprecia-
tion could p r o v i d e the basis for increased exports
in the m e d i u m term.
W e have s h o w n in this study t h a t external
shocks a n d a d j u s t m e n t policies have an impact
on the whole e c o n o m y . T h e effects are not
c o n f i n e d to the sector which h a p p e n s to have
suffered the i m m e d i a t e shock n o r the one which
initially seems to benefit from the a d j u s t m e n t
policy. M o r e o v e r , via the impact on relative
prices, policies have far-ranging effects on em-
p l o y m e n t , the real e x c h a n g e rate a n d the sectoral
income levels. In partial s u p p o r t of I M F - t y p e
NOTES
I. For a simple model outlining the foreign exchange
effects of the mineral sector see Kayizzi-Mugerwa
(1988), pp. 86--88.
2. Variablcs and parameters for ZMS arc summa-
rized in the appendix.
3. See, for instance, Deaton and Muellbauer (1981)),
p. 64.
4. Most of the data derive from a social accounting
matrix for Zambia for the year 1980. For this and other
data sources see the appendix.
5. For full details regarding the derivation of factor
shares, see Kayizzi-Mugerwa (1988), pp. 120-123.
6. Table A2 in the appendix shows expenditure
categories by sector of origin.
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and Economic Development (Lexington, MA:
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Vol. 18, No. 2 (1982).
Andersson, P., and S. Kayizzi-Mugerwa, "'Mincral
dependence, goal attainment and equity: Zambia's
experiences with structural adjustment in the 1980s"
(Stockholm: SIDA, 1989).
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(Lusaka: Government Printing Office, 1985a).
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and Input Output Tables" 1980 (Lusaka: Government
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ing Census o f Zambia, Analytical Report Vol. II
policies, we f o u n d t h a t an a d j u s t m e n t package
that e m p h a s i z e d d o m e s t i c austerity would be the
most likely to reduce p r o d u c t i o n costs a n d have
positive impacts on d o m e s t i c p r o d u c t i o n in the
m e d i u m to long run. Such policies, h o w e v e r ,
would also imply large real e x c h a n g e rate adjust-
m e n t s . In practical t e r m s the size of the devalua-
tion of the n o m i n a l e x c h a n g e rate necessary to
realize a f a v o r a b l e change in the real e x c h a n g e
rate might be politically u n a c c e p t a b l e . Success
thus d e p e n d s to a large e x t e n t on how transition
costs are distributed a m o n g the different sectors
a n d g r o u p s a n d on the political work put into
selling the e c o n o m i c a d j u s t m e n t package.
7. Sectoral trade shares with emphasis on manufac-
turing are estimated in Table A3 in the appendix.
8. To look at the reasonableness of our rcsults, wc
compared deviations of outcomes between thc refer-
ence run and ZSAM to the actual change, i.e., between
1981) and 1982. As can be seen in "Fable A4 in thc
appendix, the results were quite reasonable.
9. Government expenditure is exogenous, giving us
freedom to change its size to suit the requirements of
the particular experiment.
11). See Table A3 in the appendix.
(Lusaka: Government Printing Office, 1985c).
Central Statistical Office (CSO), Report on Employ-
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Office, 1983).
Central Statistical Office (CSO), Manpower Survey in
the Mining Sector 1980 (Lusaka: Government Print-
ing Office, 1982a).
Central Statistical Office (CSO), Manpower Survey m
the Private Manufacturing Sector (Lusaka: Govern-
ment Printing Office, 1982b).
Central Statistical Office (CSO), Household Budget
Survey 1974/75 Preliminary Report (Lusaka: Govern-
ment Printing Office, 1980).
Central Statistical Office (CSO), Annual Statement o j
External Trade (Lusaka: Government Printing
Office, various issues).
Central Statistical Office (CSO), Census o f Industrial
Production (Lusaka: Government Printing Office,
various issues).
 E X T E R N A L SHOCKS AND A D J U S T M E N T
Central Statistical Office (CSO), Monthly Bulletin of
Statistics (Lusaka: Government Printing Office,
various issues).
Collier, P., "Macroeconomic effects of oil on poverty in
Nigeria," IDS Bulletin, Vol. 18, No. l (1987).
Cordon, T., V. Carbo, and J. de Melo, "Productivity
growth, external shocks, and capital inflows in Chile:
A general equilibrium analysis," Journal o f Policy
Modeling, Vol. 7, No. 3 (1985).
Deaton, A., and J. Muellbauer, Economics and Con-
sumer Behaviour (Cambridge: Cambridge University
Press, 1980).
Dervis, K. et al., General Equilibrium Models for
Development Policy (Cambridge: Cambridge Uni-
versity Press, 1982).
Edwards, S., "Coffee, money and inflation in Col-
ombia,'" World Development, Vol. 12, Nos. 11-12
(1984).
Government of Zambia, Fourth National Development
Plan (Lusaka: Government Printing Office, 1989).
Government of Zambia, Economic Report (Lusaka:
Government Printing Office, various years).
Johansen, L., A Multi-Sectoral Study of Economic
Growth (Amsterdam: North-Holland, 1960).
Kamas, L., "'Dutch Disease economics and the Col-
ombian export boom," World Development, Vol. 14,
No. 9 (1986).
Kayizzi-Mugerwa, S., "Growth from own resources:
A P P E N D I X : V A R I A B L E S A N D P A R A M E T E R S F O R ZMS
a o = input-output coefficients.
% - the elasticity of qj with respect to inputs of
skilled labor.
[~i = the elasticity of qj with respect to inputs of
unskilled labor,
/~ = current account deficit.
ci - consumer expenditure on good i.
co, = committed expenditures on good i.
ei = exports from sector i.
~ = exports in the reference year for sector i.
El = export elasticity for sector i.
g, = public expenditure on goods from sector i.
¥/ = shift parameter in sector j's production function,
Kj = capital inputs in sector j's production function.
LIi = inputs of skilled labor sector j.
L_2j = inputs of unskilled labor sector j.
L~ - stock of skilled labor,
/~2 - stock of unskilled labor.
m~ = imports of sector i's description.
~t~ - "'user" ratio, fraction of imports to domestically
originated supply,
863
Zambia's Fourth National Development Plan in
perspective," Development Policy Review, Vol. 18,
No. 1 (1990).
Kayizzi-Mugerwa, S., "External shocks and adjustment
in Zambia," Ph.D. dissertation (Gothenburg:
Gothenburg University, 1988).
Lewis, S. R. Jr, "'Development problems of the
mineral-rich countries," in M. Syrquin, M. L.
Taylor, and L. E. Westphal (Eds.), Economic
Structure and Performance (New York: Academic
Press, 1984).
Markowski, A., and R. Radetski, "State ownership
and the price sensitivity of supply: The case of the
copper mining industry," Seminar Paper No. 351
(Stockholm: Institute for International Economic
Studies, 1986).
Rattso, J., "Different macroclosures of the original
Johansen model and their impact on policy evalua-
tion," Journal of Policy Modeling, Vol. 4, No. 1
(1982).
Rittenberg, L., "'Export growth performance of less-
developed countries," Journal of Development
Economics, Vol. 24 (1986).
Schatz, S. P., Nigerian Capitalism (Los Angeles:
University of California Press, 1977).
Seidman, A., "Import-substitution industrialisation:
The Zambian case," Journal o f Modern African
Studies, Vol. 13 (1974).
~t~] = "user" ratio in the reference period.
~t~ = import elasticity for sector i's goods.
~ = prices for domestically produced commodities.
pe = prices for sectoral exports.
pj - domestic market price for sector output.
~ = world price for imports.
~' = value added per unit of sectoral output.
,~ = sectoral supply.
demand for sector j's goods.
o~ - marginal budget share for expenditure category
i.
w u = sectoral wage rate for skilled labor.
w2j = sectoral wage rate for unskilled labor.
(O 1 wage level for skilled labor.
(0 2 wage level for unskilled labor.
~ u = wage shifting constant for skilled labor in sector
j.
w~j = wage shifting constant for unskilled labor in
sector j.
Y = total private expenditure.
z, = sector i's deliveries to investment.
i - 1...7 j- 1...7.
 Table A1. Social Accounting Matrix for Zambia ( Z S A M ) -- 1980 (millions of kwacha)

Receipts Agricul Manu- Construe- Transport Private Public Invest- Depreci- Competitive Trade Indirect Direct Gross
ture Mining facturing tion Commerce & communication Services Expenditure Expenditure ment AStocks ation Exports Imports taxes taxes taxes Output
Deliveries 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1. Agriculture 4.6 18.3 61.9 0 3.1 3 15.7 389.4 0 2.5 (0.6) 0 12.1 (2.7) 0 0 (1 507.3
2 Mining 0 18.6 3.4 0 0 1.6 5.6 3 0 0 56.4 0 1,063.9 (0.3) 0 0 0 1.152.2
3 Manufacturing 8.1 1/14.3 123.7 31.7 36.7 13.6 189.1 792.4 1) 23.1 84.8 1) 49.7 (127.6) 0 1) 0 1,329.6 ©
4 Construction 1.2 13.3 17 2.1 1.7 2.4 46 0 () 163.1 0 0 0 11 0 1) 0 232.5 7z
5. Commerce 8.4 555 75 13.1 49.4 29,8 492 158.8 0 59 13.4 0 I1 3 0 0 11 0 518.6 t"
6. Transport & ~7
communications 1.3 76.8 34.2 7 34.9 16.4 7/).6 48.7 11 1) 0 0 1';88 0 0 0 () 378.8
7 Services 3.2 164.9 483 11.2 293 21 184.9 279.3 781.0 11 0 0 34.8 (0.5) 0 0 0 1,558
8. Z 1 7 26.8 451.1 3481 65.1 155.1 88 562.9 1,671.6 781.6 2296 155 0 1,286.2 (1311) 0 0 0 5,677 <
9 Factor incomes
a l.abor 712 3121 1575 54.7 155 114 572.3 11 0 0 0 0 0 0 0 0 0 1.436.8 t"
©
b. Capital 330.8 1297 1963 38.4 2246 0.6 174.9 0 0 0 0 0 0 0 0 0 0 1,094.1
111. G o v e r n m c m
revenue 0 0 () 0 0 0 0 55.7 0 0 0 11 25.6 0 II 417.8 318.6 817.7
11. Depreciation 32.7 578 45 25 2 14.1 34.6 128,7 0 0 0 0 0 0 1} 0 0 11 339.1 z,..q
12. (;ross saving':, 0 0 0 0 0 0 0 457b (256.9) 0 0 339.1 0 0 0 0 0 530.8
13 hnports 77.3 2015 418.5 48.7 2.3 141.7 114.4 0 105.2 328.7 0 0 0 131.1 0 0 0 1.569.4
14 Subsidies (31.51 0 (52) 0 1160.1) 11 0 0 196.8 11 0 0 0 0 0 0 0 0
15 Indirect taxe< 0 0 169.4 114 127.6 1.3 6.6 0 0 0 0 0 0 0 112.5 0 0 417,8
16. Direct taxes 0 0 0 11 0 0 0 318.6 0 0 0 0 0 0 0 0 0 318.6
17. Gross output 507.3 1,1522 1,329.6 232.5 518.6 378.8 1,558 2,503.5 817.7 576.4 155 339. I 1,286.2 0 112.5 417.8 318.6

Sources: CS() publications listed in references

 EXTERNAL SHOCKS AND ADJUSTMENT 865

T a b l e A2. Expenditure categories by sectors of origin (millions of kwacha)

Sector of O r i g i n
Category 1 2 3 4 5 6 7 Z

1. Food, drink and tobacco 382.2 -- 415 . . . . 797.2

2. C l o t h i n g and f o o t w e a r -- -- 142.4 . . . . 142.4
3. R e n t and fuel 7.4 3 30 -- 20 -- 81.3 141.7
4. Household equipment -- -- 102 . . . . 102
5. Health -- -- 8 -- 7 -- 51.5 66.5
6. T r a n s p o r t and c o m m u n i c a t i o n . . . . . 48.7 -- 48.7
7. Education and recreation -- -- 10 -- 7 -- 5.2 22.2
8. Other -- -- 85 -- 124.8 -- 141.3 351.1
9. Total 389.6 3 792.4 -- 158.8 48.7 279.3 1,671.8

Source: Z S A M a n d v a r i o u s p u b l i c a t i o n s of the C e n t r a l Statistical Office.

T a b l e A3. Sectoral trade shares 1980 (millions of kwacha)

Exports Imports Output Tradability (percentage)

Sector 1 2 3 (1 + 2)13

Agriculture 12.1 43.2 507.3 11

Mining 1,063.9 3 1,152.2 92
Manufacturing
-- Food manufacturing 7.5 43.2 322.8 15
--Beverages and tobacco 0.4 2.5 274.6 1
--Textiles and l e a t h e r 3.3 86.4 305.8 29
--Wood and furniture 1.2 9.6 44.5 24
--Paper and stationery 1.4 29.1 83.2 37
--Chemicals and rubber 15.2 397.5 623 66
-- Non-metallic minerals 8.7 33.9 106.6 40
--Basic metal products 0 10.1 89.2 11
--Fabricated metal products 11.9 598.4 813 75
-- Other manufacturing 0.1 24.2 35.5 68
Construction 0 0 232.5 0
Commerce 11.3 0 518.6 2
T r a n s p o r t and c o m m u n i c a t i o n 84.5 0 379 22
Services 24.4 0 1,558 2

Source: Z S A M a n d various p u b l i c a t i o n s of the C e n t r a l Statistical Office.

T a b l e A4. Reference vs. actual outcome

Sectoral o u t p u t s
% Deviation Real change
Sectors from Z S A M % 1980-82

1 -0.5 -0.5
2 -1.4 5
3 5.02 8.2
4 -7.07 -17
5 -7 -2
6 -3.5 0.6
7 6 13.2

Source: C S O (1985a).