Economy

The economy of Zambia is based on copper and cobalt (which provide over half the national income); gold, silver, lead, zinc; maize, sugar, millet, cassava, sorghum, groundnuts, pulses, cotton, tobacco and cattle. Manufacturing industries include copper wire, fertilizer, cement, explosives, sugar refining, food processing, vehicle assembly, tyres, textiles, glassware, bricks, brewing and oil refining.

Economy In Depth

Zambia is one of Sub-Saharan Africa's most highly urbanized countries. About one-half of the country's 10 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are under-populated. Unemployment and underemployment are serious problems. Per capita annual incomes are currently at about one-half their levels at independence, and place the country among the world's poorest nations. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 35 years) and maternal and infant mortality (95 per 1,000 live births). The high population growth rate of 2.3% per annum makes it difficult for per capita income to increase. The country's rate of economic growth cannot support rapid population growth or the strain which HIV/AIDS-related issues (i.e., rising medical costs, street children, and decline in worker productivity) places on government resources.

HIV/AIDS

HIV/AIDS is the nation's greatest problem, with 17% prevalence among the adult population. HIV/AIDS will continue to ravage Zambian economic, political, cultural, and social development for the foreseeable future.

Economic Reform

Once a middle-income country, Zambia began to slide into poverty in the 1970s when copper prices declined on world markets. The socialist government made up for falling revenue with several abortive attempts at International Monetary Fund structural adjustment programmes (SAPs), which ended after popular outcries from the people. After democratic multi-party elections, the Chiluba government (1991-2001) came to power in November 1991 committed to an economic reform program. The government privatised most of the parastatals (state-owned corporations), maintained positive real interest rates, eliminated exchange controls, and endorsed free market principles. However, corruption grew dramatically under the Chiluba government. It remains to be seen whether the Mwanawasa government will be aggressive in continuing economic reform.

Foreign Debt

Zambia is still dealing with economic reform issues such as the size of the public sector and improving Zambia's social sector delivery systems. NGOs and other groups have contended that the SAPs, in Zambia and other countries, have had very detrimental effects on the poor. Zambia's total foreign debt exceeded $6 billion when the country qualified for Highly Indebted Poor Country Initiative (HIPC) debt relief in 2000, contingent upon meeting certain performance criteria. Initially, Zambia hoped to reach the HIPC completion point, and benefit from substantial debt forgiveness, in late 2003. In January 2003, the Zambian Government informed the IMF and World Bank that it wished to renegotiate some of the agreed performance criteria calling for privatisation of the Zambia National Commercial Bank and the national telephone and electricity utilities. Although agreements were reached on these issues, subsequent overspending on civil service wages delayed Zambia's final HIPC debt forgiveness from late 2003 to early 2005, at the earliest. In an effort to reach HIPC completion in 2004, the government drafted an austerity budget for 2004, freezing civil service salaries and increasing a number of taxes. The labour movement and other components of civil society have objected to the sacrifices called for in the budget, and, in some cases, the role of the international financial institutions in demanding austerity.

Agriculture

The agriculture sector represented 20% GDP in 2000. Agriculture accounted for 85% of total employment (formal and informal) for 2000. Maize (corn) is the principal cash crop as well as the staple food. Other important crops include soybean, cotton, sugar, sunflower seeds, wheat, sorghum, millet, cassava, tobacco and various vegetable and fruit crops. Floriculture is a growth sector, and agricultural non-traditional exports now rival the mining industry in foreign exchange receipts. Zambia has the potential for significantly increasing its agricultural output; currently, less than 20% of its arable land is cultivated. In the past, the agriculture sector suffered from low producer prices, difficulties in availability and distribution of credit and inputs, and the shortage of foreign exchange.

Copper

The Zambian economy has historically been based on the copper-mining industry. Output of copper had fallen, however, to a low of 228,000 tonnes in 1998, continuing a 30-year decline in output due to lack of investment, and more recently, low copper prices and uncertainty over privatisation. In 2001, the first full year of a privatised industry, Zambia recorded its first year of increased productivity since 1973. The future of the copper industry in Zambia was thrown into doubt in January 2002, when investors in Zambia's largest copper mine announced their intention to withdraw their investment. However, surging copper prices from 2004 to the present day rapidly rekindled international interest in Zambia's copper sector with a new buyer found for KCCM and massive investments in expanding capacity launched. China has become a major investor in the Zambian copper industry, and in February of 2007, the two countries announced the creation of a Chinese-Zambian economic partnership zone around the Chambishi copper mine.

Today copper mining is central to the economic prospects for Zambia, but concerns remain that the economy is not diversified enough to cope with a collapse in international copper prices.

The Zambian Government is pursuing an economic diversification program to reduce the economy's reliance on the copper industry. This initiative seeks to exploit other components of Zambia's rich resource base by promoting agriculture, tourism, gemstone mining and hydro power. In 2003, non-metal exports increased by 25% and accounted for 38% of all export earnings, previously 35%. The Zambian government has recently been granting licenses to international resource companies to prospect for minerals such as nickel and uranium.