The Dutch Disease Phenomenon in Zambia

Besides offering a number of indicators of possible Dutch Disease presence, the thesis gives an array of policy prescriptions that countries infected can adopt. The policies have been simplified so that non-specialists in the field of economics can understand them with ease. I argue that the exchange rate is one of the most important policy instruments to drive economic growth and in tandem economics development. It is vitally important to manage the exchange rate at levels that incentivise investment in manufactures to boost the export sector. Doing so would offer the economy the resilience needed to counter less benign movement in commodity prices which are beyond the control of small less developed countries like Zambia. As I argue, the Zambian authorities by floating the Kwacha have left the economy exposed to swings commodity prices making it difficult to get the economy off the ground after many years of stagnation. Zambia experienced two decades of economic slumber following poor economics policies of both the Kaunda and Chiluba eras. To attain macroeconomic balance requires both internal and external balance: which gives the exchange rate a significant role to play.