Economy of Zambia
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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 at $302, 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 decline in worker productivity) places on government resources.
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Economic reform
The Chiluba government (1991-2001), which came to power after democratic multi-party elections in November 1991, was committed to extensive economic reform. The government privatised many state industries, and maintained positive real interest rates. Exchange controls were eliminated and free market principles endorsed. It remains to be seen whether the Mwanawasa government will follow a similar path of implementing economic reform and undertaking further privatization. Zambia has yet to address issues such as reducing the size of the public sector, which still represents 44% of total formal employment, and improving Zambia's social sector delivery systems.
After the government privatized the giant parastatal mining company Zambian Consolidated Copper Mines (ZCCM), donors resumed balance-of-payment support. The final transfer of ZCCM's assets occurred on March 31, 2000. Although balance-of-payment payments are not the answer to Zambia's long-term debt problems, it will in the short term provide the government some breathing room to implement further economic reforms. The government has, however, spent much of its foreign exchange reserves to intervene in the exchange rate mechanism. To continue to do so, however, would jeopardize Zambia's debt relief. Zambia qualified for HIPC debt relief in 2000, contingent upon the country meeting certain performance criteria, and this should offer a long-term solution to Zambia's debt situation. 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 privatization of the Zambia National Commercial Bank and the national telephone and electricity utilities.
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 privatization. In 2001, the first full year of a privatized 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.
Inflation
Lack of balance-of-payment support meant the Zambian government did not have resources for capital investment and periodically had to issue bonds or otherwise expand the money supply to try to meet its spending and debt obligations. The government continued these activities even after balance-of-payment support resumed. This has kept interest rates at levels that are too high for local business, fuelled inflation, burdened the budget with domestic debt payments, while still falling short of meeting the public payroll and other needs, such as infrastructure rehabilitation. The government was forced to draw down foreign exchange reserves sharply in 1998 to meet foreign debt obligations, putting further pressure on the kwacha and inflation. Inflation held at 32% in 2000; consequently, the kwacha lost the same value against the dollar over the same period. In mid- to late 2001, Zambia's fiscal management became more conservative. As a result, 2001 year-end inflation was below 20%, its best result in decades. In 2002 inflation rose to 26.7%.
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.
Growth
There are, however, positive macroeconomic signs, rooted in reforms implemented in the early and mid-1990s. Zambia's floating exchange rate and open capital markets have provided useful discipline on the government, while at the same time allowing continued diversification of Zambia's export sector, growth in the tourist industry, and procurement of inputs for growing businesses. Some parts of the copper belt have experienced a significant revival as spin-off effects from the massive capital reinvestment are experienced.
Economy - overview
Despite privatization and budgetary reform, Zambia's economic growth remains below the 5% to 7% necessary to reduce poverty significantly. Privatization of government-owned copper mines relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. However, low mineral prices have slowed the benefits of privatizing the mines and have reduced incentives for further private investment in the sector. Cooperation continues with international bodies on programs to reduce poverty.
After severe food shortages in 2002, Zambia more than doubled its maize harvest in 2003, exporting 15 000 tonnes to Zimbabwe, 4 100 tonnes to Namibia and 5000 tonnes to Botswana, as well as 60 000 to the Democratic Republic of Congo.
GDP: purchasing power parity - $8.9 billion (8.9 G$) (2002 est.), $8.5 billion (1999 est.)
GDP - real growth rate: 4.2% (2002 est.), 1.5% (1999 est.)
GDP - per capita: purchasing power parity - $890 (2002 est.), $880 (1999 est.)
GDP - composition by sector:
agriculture: 22%
industry: 26%
services: 52% (2001)
agriculture: 20.6%
industry: 30.6%
services: 48.8% (1998 est.)
Population below poverty line: 86% (1993 est.)
Household income or consumption by percentage share:
lowest 10%: 1.1%
highest 10%: 41% (1998)
lowest 10%: 1.5%
highest 10%: 31.3% (1993)
Distribution of family income - Gini index: 52.6 (1998)
Inflation rate (consumer prices): 21% (2002 est.), 27.4% (1999 est.)
Labour force: 4.29 million (2000), 3.4 million (2000)
Labour force - by occupation: agriculture 85%, industry 6%, services 9%
Unemployment rate: 50% (2000 est.), 25% (1998)
Budget:
revenues: $1.2 billion (2001), $606 million
expenditures: $1.25 billion (2001), $547 million, including capital expenditures of $61 million (1998 est.)
Industries: copper mining and processing, construction, foodstuffs, beverages, chemicals, textiles, fertilizer, horticulture
Industrial production growth rate: 5.1% (2001 est.), -4% (1998)
Electricity - production: 8,160 GWh (1998)
Electricity - production by source:
fossil fuel: 0.5%
hydro: 99.5%
other: 0% (2001)
nuclear: 0%
fossil fuel: 0.49%
hydro: 99.51%
nuclear: 0%
other: 0% (1998)
Electricity - consumption: 5,458 GWh (2001), 6,419 GWh (1998)
Electricity - exports: 1,750 GWh (2001), 1,200 GWh (1998)
Electricity - imports: 0 kWh (2001), 30 GWh (1998)
Oil - consumption: 11,000 barrel/day (1,700 m³/d) 2001
Agriculture - products: maize, sorghum, rice, peanuts, sunflower seed, tobacco, cotton, sugar cane, cassava (tapioca); cattle, goats, pigs, poultry, beef, pork, poultry, milk, eggs, hides; coffee
Exports: $709 million f.o.b. (2001), $900 million (f.o.b., 1999 est.)
Exports - commodities: copper 55%, cobalt, electricity, tobacco, flowers, cotton
Exports - partners: South Africa 25.5%, Switzerland 9.2%, Malawi 7.8%, Thailand 7.7% (2001)
Japan, Saudi Arabia, India, Thailand, South Africa, United States, Malaysia (1997)
Imports: $1.123 billion f.o.b. (2001), $1.15 billion (f.o.b., 1999 est.)
Imports - commodities: machinery, transportation equipment, petroleum products, electricity, fertilizer; foodstuffs, clothing
Imports - partners:
South Africa 65.1%, Zimbabwe 6.5%, UK 3.2%, Tanzania 2.9%, US (2001)
South Africa 48%, Saudi Arabia, United Kingdom, Zimbabwe (1997)
Debt - external: $5.8 billion (2001), $6.7 billion (1998 est.)
Economic aid - recipient: $651 million (2000 est.), $1.99 billion (1995)
Currency: 1 Zambian kwacha (ZK) = 100 ngwee
Exchange rates: Zambian kwacha (ZK) per US$1 - 3,610.93 (2001), 3,110.84 (2000), 2,388.02 (1999), 1,862.07 (1998), 1,314.50 (1997), 1,207.90 (1996), 864.12 (1995)
Fiscal year: calendar year