Economical overview
Zambia's economy has grown substantially
since the beginning of the 21st century. A major reason
for this has been high copper prices, which is the
country's most important export product. Gross domestic
product (GDP) has increased by 5-7 percent annually
since 2003 - a higher growth rate than the average for
sub-Saharan Africa.
The good growth, combined with the write-down of
external debt, has significantly improved Zambia's
public finances. Nevertheless, the economic conditions
for the population as a whole have not changed much.
According to the World Bank, 60 percent of the
population still lived in poverty in 2015.
-
Countryaah.com:
Major imports by Zambia, covering a full list of top products imported by the country and trade value for each product category.
In addition, the Zambian economy can be said to be
fragile, as it is closely linked to the copper price in
the world market. Zambia is one of the world's largest
copper producers and the country's economic growth,
trade balance and exchange rate are strongly affected by
the copper price fluctuations.
The Government of Zambia is trying to reduce its
dependence on copper, for example through agricultural
development. Export income from agricultural products
has increased in recent years, partly by growing large
areas of unused land and partly by using more efficient
cultivation methods on the land that is already being
utilized.
The tourism industry has great growth potential. Not
least, tourism is an important source of foreign
currency.
-
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ZWB which represents the country of Zambia.
Debt and cuts
During Zambia's first decade as an independent state
(1964-1974), the economy grew rapidly. The growth was
entirely based on copper extraction, which generated
large export revenues and enabled important investments.
Industrialization was prioritized and it took place
largely under the auspices of the state. At the same
time, agriculture was neglected, creating an imbalance
between the city and the countryside that still exists.
When the world market price of copper fell
significantly during the 1970s, it meant a severe blow
to the Zambian economy. An acute economic crisis arose
in the mid-1980s. The external debt was then more than
twice the country's GDP. Zambia was forced to take out
loans from the World Bank and the International Monetary
Fund (IMF), which demanded tightening and cuts in
central government spending in exchange for the loans.
When President Frederick Chiluba and his party
Movement for Multiparty Democracy (MMD)
won government power in 1991, Zambia was the world's
most debt-ridden country in terms of GDP. Chiluba,
formerly a union leader, underwent tough economic
reforms to meet international lenders' demands. In July
1992, Parliament passed a law on the privatization of
large parts of the state business sector. Since then,
hundreds of state-owned companies have been sold.
Economic policy was approved by the lenders and in
1996 Zambia had some of its debt written off. Four years
later, the country was given the green light for new
debt relief. The terms from the IMF and the World Bank
were now that Zambia would invest in poverty reduction.
Between 2002 and 2004, investments were made in
agricultural development, the tourism industry and in
the transport and energy sectors. Other areas that
received more resources were education, health care and
efforts to combat the HIV and AIDS epidemic (see Social
conditions).
Zambia becomes a middle-income country
After 2004, Zambia received further debt write-offs,
while export revenues grew. A temporary fall came in the
fall of 2008, when the copper price fell as a result of
the global financial crisis that erupted that year. Many
mines had to close for a period, while the important
maize harvest failed. However, Zambia handled the crisis
better than many comparable countries. When the demand
for copper again increased, foreign investors came back
and the mines could open again in 2010–2012.
Agriculture's contribution to the economy increased, not
least the maize crop. In 2015, Zambia was able to export
some of its maize surplus to neighboring countries
affected by drought or flooding.
In 2011, the World Bank began to classify Zambia as a
lower average income country. This meant that Zambia was
given more opportunities to take commercial bank loans.
At the same time, access to the most favorable credits
for poor, debt-burdened countries declined. Some donors
also cut back on their programs in the country.
When President Michael Sata and his party the
Patriotic Front (PF) came into
office in 2011, a more expansionary fiscal policy was
implemented. The subsidies to agriculture increased,
among other things the farmers received government
subsidies for the purchase of seeds and maize. Fuel
subsidies were also introduced. In addition, the Sata
government invested in improving the infrastructure,
including the road network. As early as 2013, however,
Sata was forced to abolish the subsidies on maize and
fuel due to a growing deficit in the state budget.
Conflict with mining companies
In October 2014, the Sata government decided to
significantly increase the foreign mining companies'
so-called royalty fees to the Zambian state. Some
companies got their fees triple. At the same time, the
corporate tax was abolished. The purpose of these
changes was to increase the state's revenue, as few
mining companies paid corporate tax according to the
government. The mining companies warned that they would
be forced to close unprofitable mines and freeze planned
investments.
An opening of the conflict with the mining companies
came in July 2015 when President Edgar Lungu's newly
appointed government lowered royalty fees and introduced
a 30 percent corporate tax. The decision was welcomed by
the IMF and the World Bank, which urged the Lungu
government to tighten state spending to prevent further
budget deficits from escalating. The budget deficit in
2014 amounted to 5.5 percent of GDP.
In order to cover the budget deficits and at the same
time to fund investments in, among other things,
government bonds have been issued since 2012. The latest
government bond from 2015 withdrew the equivalent of
1.25 billion US dollars. Foreign debt's share of GDP is
now considered manageable. In June 2015, the Minister of
Finance stated that it was just under one fifth of GDP.
Inflation, which exceeded 20 percent as late as the
early 2000s, has been pushed back. In 2005–2014, the
price increase rate averaged 9 percent annually.
Despite the positive economic development in Zambia,
growth has not been high enough to seriously combat the
widespread poverty. Although new schools, hospitals and
roads have been built, the lack of materials and
qualified staff remains great. For the vast majority of
the population, growth has not significantly improved
the standard of living. Most Zambians still live by
simple farming for their own household - an unsafe way
of living in a country that is often hit by drought.
FACTS - FINANCE
GDP per person
$ 1,540 (2018)
Total GDP
US $ 26,720 million (2018)
GDP growth
3.8 percent (2018)
Agriculture's share of GDP
2.6 percent (2018)
Manufacturing industry's share of GDP
8.5 percent (2018)
The service sector's share of GDP
54.1 percent (2018)
Inflation
10.0 percent (2019)
Government debt's share of GDP
78.1 percent (2018)
External debt
US $ 16,309 million (2017)
Currency
Zambian kwacha
Assistance per person
US $ 60 (2017)
2004
September
The ex-president is cleared of charges
President Chiluba is set free on several charges but will soon face new
corruption charges.
|