ECONOMY
About two-thirds of Zambians live in poverty. Per capita annual incomes are well below their levels at independence and, at $921, place the country among the world's poorest nations. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 37 years) and maternal mortality (729 per 100,000 pregnancies). 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, decline in worker productivity) place on government resources. Zambia is also one of Sub-Saharan Africa's most highly urbanized countries. Over one-third of the country's 12 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are underpopulated. Unemployment and underemployment are serious problems.
HIV/AIDS is the nation's greatest challenge, with 17% prevalence among the adult population. HIV/AIDS will continue to ravage Zambian economic, political, cultural, and social development for the foreseeable future.
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 by increasing borrowing. After democratic multi-party elections, the Chiluba government (1991-2001) came to power in November 1991 committed to an economic reform program. The government was successful in some areas, such as privatization of most of the parastatals, maintenance of positive real interest rates, the elimination of exchange controls, and endorsement of free market principles. Corruption grew dramatically under the Chiluba government. Zambia has yet to address effectively issues such as reducing the size of the public sector and improving Zambia's social sector delivery systems.
For 30 years, copper production declined steadily from a 1973 high of 700,000 metric tons to a 2000 low of 226,192 metric tons. The decline was the result of poor management of state-owned mines and lack of investment. With the privatization of the mines in April 2000, the downward trend in production and exports was reversed as a result of investments in plant rehabilitation, expansion, increased exploration, and high copper prices on the international market. Copper production rose to 515,000 metric tons in 2006, and a similar level is estimated for 2007.
Zambia experienced positive economic growth for the ninth consecutive year in 2007 with a GDP of U.S. $10.9 billion and a real growth rate of 6% (according to preliminary IMF estimates). The rate of inflation dropped from 30% in 2000 to a single digit inflation of 8.9% by December 2007 due to fiscal and monetary discipline and the growth of the domestic food supply.
In April 2005, the International Monetary Fund (IMF) and the World Bank's International Development Association (IDA) provided Zambia significant debt service relief and debt forgiveness under the Heavily Indebted Poor Countries (HIPC) initiative. Zambia was the 17th country to reach the HIPC completion point and has benefited from approximately U.S. $6 billion in debt relief. In July 2005, the G-8 agreed on a proposal to cancel 100% of outstanding debt of eligible HIPC countries to the IMF, African Development Fund, and IDA. Zambia is among the beneficiaries of this additional multilateral debt relief. Zambia also completed a Poverty Reduction and Growth Facility (PRGF) arrangement with the IMF in 2007, and the government has not yet determined whether it will seek another PRGF program or pursue a different arrangement with the IMF, a Policy Support Instrument (PSI), which would not involve additional lending.
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. The government is also seeking to create an environment that encourages entrepreneurship and private-sector led growth. The 2008 budget contained provisions for tax alleviation, as well as increased allotments for healthcare, education, and economic development.
GDP (2006, current prices): $10.9 billion.
Annual growth rate (2007, preliminary): 6.2%.
Per capita GDP (2006, current prices): $921.
Natural resources: Copper, cobalt, zinc, lead, coal, emeralds, gold, silver, uranium, hydroelectric power, fertile land.
Agriculture: Products--corn, sorghum, rice, groundnuts, sunflower seeds, vegetables, horticultural products, tobacco, cotton, sugarcane, livestock, coffee, and soybeans.
Industry: Types--mining, transport, construction, foodstuffs, beverages, chemicals, and textiles.
Trade (2006): Exports--$3.54 billion: copper, cobalt, lead, and zinc, cut vegetables, cotton, tobacco. Major markets--South Africa, United Kingdom, Tanzania, Malawi, Zimbabwe, Japan. Imports--$2.7 billion: crude oil, refined petroleum products, manufactured goods, machinery, transport equipment, foodstuffs, chemicals. Major suppliers--South Africa, China, Tanzania, United Kingdom.
Major donors: Donors provided $1.1 billion in development assistance to Zambia in 2005/6. The World Bank is Zambia's largest multilateral donor. Other key multilateral donors include the International Monetary Fund (IMF), the European Union, UN agencies, and the African Development Bank. Counting direct bilateral assistance and assistance through multilateral agencies, the U.S. is Zambia's largest country donor.
