Zambia - Economy

Economy

About 68% of Zambians live below the recognised national poverty line, with rural poverty rates standing at about 78% and urban rates of 53%. Zambia ranked 117th out of 128 countries on the 2007 Global Competitiveness Index, which looks at factors that affect economic growth. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 40.9 years) and maternal mortality (830 per 100,000 pregnancies). The country's rate of economic growth cannot support rapid population growth or the strain which HIV/AIDS-related issues place on the economy.

During the decades of Kaunda's socialist policies, Zambia fell into poverty, especially after international copper prices declined in the 1970s. The socialist regime made up for falling revenue with several abortive attempts at International Monetary Fund structural adjustment programmes (SAPs). After the dictatorship ended, successive governments have begun limited reforms. The economy stagnated until the late 1990s. In 2007 Zambia recorded its ninth consecutive year of economic growth. Inflation was 8.9%, down from 30% in 2000.

Zambia is still dealing with economic reform issues such as the size of the public sector and improving Zambia's social sector delivery systems. Economic regulations and red tape are extensive, and corruption is widespread. 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 International Monetary Fund 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 tax hike and public sector wage freeze prohibited salary increases and new hires. This sparked a nationwide strike in February 2004.

The Zambian economy has historically been based on the copper mining industry. Output of copper had fallen, however, to a low of 228,000 metric tons in 1998, after a 30 year decline in output due to lack of investment, low copper prices, and uncertainty over privatisation. In 2002, following privatisation of the industry, copper production rebounded to 337,000 metric tons. Improvements in the world copper market have magnified the effect of this volume increase on revenues and foreign exchange earnings.

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.

Agriculture plays a very important part in Zambia's economy providing many more jobs than the mining industry. Private local company Zambeef Products Ltd. is the leading agri-business in Zambia with over 4.000 employees, producing row crops (5.000 ha irrigated, 1.500 ha non-irrigated), cattle (Zambeef), pork (Master Pork), chicken (ZamChick), eggs (ZamChick Egg), dairy products, leather, fish, feedstock (Novatek) and edible oil (Zamanita). Zambeef operates eight abattoirs, four farms and numerous retail stores (also in cooperation with Shoprite) and a fast-food chain (ZamChick Inn) throughout the country.

In 2003, exports of nonmetals 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, tin, copper and uranium. It is hoped that nickel will take over from copper as the country's top metallic export. In 2009, Zambia has been badly hit by the world economic crisis.

Zambia was ranked the 127th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.