Economy of Zambia

Mother Earth Travel > Country Index > Zambia > Map Economy History

Zambia is one of Sub-Saharan Africa's most highly urbanized countries. About one-half of the country's 10.2 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. Per capita annual incomes are currently at about one-half their levels at independence, and at $273, place the country among the world's poorer nations. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 37 years) and maternal and infant mortality (114 per 1,000 live births). The high population growth rate of 2.9% 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, decline in worker production) places on government resources.

The Chiluba government (1991-2001) came to power after democratic multiparty elections in November 1991, committed to an economic recovery 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. It remains to be seen whether the new Mwanawasa government will be more aggressive in implementing economic reform and undertaking further privatization. Telecommunications, electricity, and transport parastatals still need to be privatized before the economy can compete regionally and internationally. Furthermore, Zambia has yet to address effectively 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 GRZ 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.

The Zambian economy has historically been based on the copper mining industry. Output of copper has fallen, however, to a 1990s 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 by investors in Zambia's largest copper mines, who have yet to return the privatized assets to profitability.

Lack of balance-of-payment support has meant the Zambian Government has not had resources for capital investment, and has periodically had to issue bonds or otherwise expand the money supply to try to meet its spending and debt obligations. The GRZ continued these activities even after balance-of-payment support resumed. This has helped keep interest rates at levels that are too high for local business, fueled 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.

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 nontraditional exports now rival the mining industry in foreign exchange receipts. Zambia has the potential for significantly increasing its agricultural output; currently, only 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.

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. The copperbelt has experienced a significant revival as spin-off effects from the massive capital reinvestment are experienced.

GDP: purchasing power parity - $8.5 billion (2000 est.)
GDP - real growth rate: 1.5% (1999 est.), 4% (2000 est.)
GDP - per capita: purchasing power parity - $880 (2000 est.)
GDP - composition by sector:
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%: 1.5%
highest 10%: 31.3% (1993)
Inflation rate (consumer prices): 27.4% (1999 est.)
Labor force: 3.4 million
Labor force - by occupation: agriculture 85%, industry 6%, services 9%
Unemployment rate: 25% (1998)
Budget:
revenues: $606 million
expenditures: $547 million, including capital expenditures of $61 million (1998 est.)
Industries: copper mining and processing, construction, foodstuffs, beverages, chemicals, textiles, fertilizer
Industrial production growth rate: -4% (1998)
Electricity - production: 8.16 billion kWh (1998)
Electricity - production by source:
fossil fuel: 0.49%
hydro: 99.51%
nuclear: 0%
other: 0% (1998)
Electricity - consumption: 6.419 billion kWh (1998)
Electricity - exports: 1.2 billion kWh (1998)
Electricity - imports: 30 million kWh (1998)
Agriculture - products: corn, sorghum, rice, peanuts, sunflower seed, tobacco, cotton, sugarcane, cassava (tapioca); cattle, goats, pigs, poultry, beef, pork, poultry, milk, eggs, hides; coffee
Exports: $900 million (f.o.b., 1999 est.)
Exports - commodities: copper, cobalt, electricity, tobacco
Exports - partners: Japan, Saudi Arabia, India, Thailand, South Africa, United States, Malaysia (1997)
Imports: $1.15 billion (f.o.b., 1999 est.)
Imports - commodities: machinery, transportation equipment, foodstuffs, fuels, petroleum products, electricity, fertilizer
Imports - partners: South Africa 48%, Saudi Arabia, United Kingdom, Zimbabwe (1997)
Debt - external: $6.7 billion (1998 est.)
Economic aid - recipient: $1.99 billion (1995)
Currency: 1 Zambian kwacha (ZK) = 100 ngwee

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > Zambia > Map Economy History