ECONOMY IN ZAMBIA
About 68% of Zambians live below the recognized national poverty line, with rural poverty rates standing at about 78% and urban rates of 53%. Per capita annual incomes are currently at about one-half their levels at independence and, at $395, place the country among the world’s poorest nations. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 40.0 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. 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 programs (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 privatized most of the parastatals (state-owned corporations), maintained positive real interest rates, eliminated exchange controls, and endorsed free market principles. Corruption grew dramatically under the Chiluba government. It remains to be seen whether the Mwanawasa government will be aggressive in continuing economic reform.
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 privatization 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 labor 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.
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 privatization. In 2002, following privatization 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. Recently, firms like Vedanta Resources, a London-based miner acquired Konkola Copper Mines (KCM). Vedanta transformed the company and continues investing in the Zambian economy. For example, it is undertaking the largest single investment in the country in early 2006. 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, 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.