THE recent reports by ZIPAR and UNUWIDER have once again underscored a truth that we, as a people, would do well to embrace: subsidies on fuel and energy are not the answer to poverty reduction. At their peak, these subsidies consumed 2.4 percent of gross domestic product (GDP), yet poverty remained stubbornly at 48.3 percent and inequality unchanged.
The benefits were skewed toward wealthier households who owned vehicles, while the majority of Zambians – 65 percent – were left out.
The Government’s bold decision in 2022 to abolish fuel subsidies was therefore not only fiscally prudent but socially just. Redirecting those funds into targeted programmes such as the Social Cash Transfer (SCT), Cash for Work and free education has already shown impressive results.
Doubling SCT payments from K200 to K400 reduced poverty by 1.5 percentage points. This is not an abstract statistic – it represents thousands of households experiencing relief from hunger, school dropouts, and medical neglect. Unlike subsidies, which favoured the middle class, SCTs reach the poorest directly, empowering families to make decisions that improve their welfare.
The Cash for Work programme lifted 32,000 individuals out of extreme poverty in its first phase. It provides income while building community assets such as roads and drainage systems.
It is a “game changer”, as Permanent Secretary Gabriel Pollen rightly put it, because it combines poverty reduction with resilience-building. Women and youth participation further ensures inclusivity and long-term empowerment.
Free education is another cornerstone of Zambia’s pro-poor agenda. Removing school fees has enabled the Government to open doors for countless children who would otherwise be excluded.
Education is the most powerful equaliser, and when combined with SCT support, it ensures that poverty does not dictate a child’s future.
As ZIPAR observed, fuel subsidies were not inherently pro-poor because the distribution of benefits was skewed toward higher-income groups with relatively higher fuel consumption. This finding justifies the redirecting of resources into programmes that directly touch the lives of the poor.
As economists have long observed, what is cardinal is to strengthen Zambia’s macroeconomic fundamentals so that the price of fuel comes down naturally, not superficially.
Subsidies are like painting over cracks in a wall: they hide the problem but do not fix it.
A stronger currency, reduced inflation and sustainable growth will bring down fuel prices in a lasting way, benefiting everyone without draining the Treasury.
It must also be remembered that the fuel subsidies implemented by the previous government left behind a fuel debt to the tune of almost US$500 million that the current administration has had to shoulder. Those subsidies were simply quick fixes – like masking tape on real cracks – providing temporary relief while creating long-term fiscal pain. Paying off that debt has constrained resources that could have been invested in schools, hospitals and social protection.
This is why Zambia must resist the temptation of short-term populism and instead focus
on sustainable reforms. Quick fixes may win applause in the moment, but they leave scars on the nation’s finances. True progress lies in strengthening the economy’s foundations, ensuring that growth is stable, inclusive, and capable of lowering costs naturally rather than artificially.
The temptation to reintroduce subsidies will always be there, especially in times of rising costs. But the evidence is clear: subsidies do not reduce poverty.
Redirecting funds into social programmes does. Zambia must stay the course, resisting populist measures and focusing instead on investments that touch lives directly.
Investing in people, not subsidies
THE recent reports by ZIPAR and UNUWIDER have once again underscored a truth that we, as a people, would do well to embrace: subsidies on fuel and energy are not the answer to poverty reduction. At their peak, these subsidies consumed 2.4 percent of gross domestic product (GDP), yet poverty remained stubbornly at 48.3 percent and inequality unchanged.
The benefits were skewed toward wealthier households who owned vehicles, while the majority of Zambians – 65 percent – were left out.
The Government’s bold decision in 2022 to abolish fuel subsidies was therefore not only fiscally prudent but socially just. Redirecting those funds into targeted programmes such as the Social Cash Transfer (SCT), Cash for Work and free education has already shown impressive results.
Doubling SCT payments from K200 to K400 reduced poverty by 1.5 percentage points. This is not an abstract statistic – it represents thousands of households experiencing relief from hunger, school dropouts, and medical neglect. Unlike subsidies, which favoured the middle class, SCTs reach the poorest directly, empowering families to make decisions that improve their welfare.
The Cash for Work programme lifted 32,000 individuals out of extreme poverty in its first phase. It provides income while building community assets such as roads and drainage systems.
It is a “game changer”, as Permanent Secretary Gabriel Pollen rightly put it, because it combines poverty reduction with resilience-building. Women and youth participation further ensures inclusivity and long-term empowerment.
Free education is another cornerstone of Zambia’s pro-poor agenda. Removing school fees has enabled the Government to open doors for countless children who would otherwise be excluded.
Education is the most powerful equaliser, and when combined with SCT support, it ensures that poverty does not dictate a child’s future.
As ZIPAR observed, fuel subsidies were not inherently pro-poor because the distribution of benefits was skewed toward higher-income groups with relatively higher fuel consumption. This finding justifies the redirecting of resources into programmes that directly touch the lives of the poor.
As economists have long observed, what is cardinal is to strengthen Zambia’s macroeconomic fundamentals so that the price of fuel comes down naturally, not superficially.
Subsidies are like painting over cracks in a wall: they hide the problem but do not fix it.
A stronger currency, reduced inflation and sustainable growth will bring down fuel prices in a lasting way, benefiting everyone without draining the Treasury.
It must also be remembered that the fuel subsidies implemented by the previous government left behind a fuel debt to the tune of almost US$500 million that the current administration has had to shoulder. Those subsidies were simply quick fixes – like masking tape on real cracks – providing temporary relief while creating long-term fiscal pain. Paying off that debt has constrained resources that could have been invested in schools, hospitals and social protection.
This is why Zambia must resist the temptation of short-term populism and instead focus
on sustainable reforms. Quick fixes may win applause in the moment, but they leave scars on the nation’s finances. True progress lies in strengthening the economy’s foundations, ensuring that growth is stable, inclusive, and capable of lowering costs naturally rather than artificially.
The temptation to reintroduce subsidies will always be there, especially in times of rising costs. But the evidence is clear: subsidies do not reduce poverty.
Redirecting funds into social programmes does. Zambia must stay the course, resisting populist measures and focusing instead on investments that touch lives directly.